Power sector liabilities stand at Rs1.78 trillion

Power Division says pace of increase in circular debt has reduced considerably

ISLAMABAD: Despite measures taken by the Power Division to bring down circular debt, the power sector still continues to bleed as it is facing total liabilities of Rs1.78 trillion.

After coming to power, the Pakistan Tehreek-e-Insaf (PTI) government had launched a drive to reduce the circular debt by improving the recovery of bills and reducing electricity theft. These measures failed to bring the desired results as liabilities of the sector stood high, including bank loans and circular debt.

Total circular debt at the end of December 2019 was Rs978 billion - owed to both public and private-sector power generators - while the liabilities of Power Holding Private Limited (PHPL) payable to banks due to loans taken in the past stood at Rs804 billion, which resulted in total liabilities of Rs1.78 trillion, according to a statement issued by the Power Division.

Commenting on the status of power sector's circular debt, a Power Division spokesperson said at the beginning of September 2018 the circular debt was Rs1.3 trillion, when the PTI government took office. It was increasing by Rs38 billion per month, he added.

"With the measures taken by the government, encapsulated in the circular debt capping plan, the power sector has considerably reduced the rate of increase to approximately Rs12-15 billion per month."

He said that various measures including tariff rationalisation, recovery drives, an anti-theft campaign and system modernisation were initiated. Due to these measures, the addition to the circular debt is expected to be reduced to Rs130 billion in 2019-20, he added.

Circular debt has been a chronic issue for all governments. In order to ensure effective implementation of the National Energy Policy (NEP) 2019, the Circular Debt Management Plan 2019 has already been approved by the PTI government that intends to reduce the flow of circular debt to less than Rs75 billion per annum while maintaining the annual subsidy target of 0.4% of GDP.

Published in The Express Tribune, February 15^th, 2020.

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