Cabinet body directs NEPRA to perform circular debt audit
CCOE notes petrol demand has dropped by 41% and diesel by 55% due to lockdown
ISLAMABAD: The Cabinet Committee on Energy (CCOE) on Friday directed the power sector regulator to audit the circular debt figures in order to determine the reality of the claim of improvement in the past one year.
The committee also reviewed the current demand and supply situation of petroleum products, noting that demand for petrol had dropped by 41% and that for high-speed diesel by about 55% due to a lockdown in most of the country to stop the spread of COVID-19. The directive to perform the circular debt audit was given by CCOE Chairman and Federal Minister for Planning Asad Umar while chairing his maiden meeting of the energy committee.
Prime Minister Imran Khan has replaced Finance Adviser Abdul Hafeez Shaikh with Umar as chairman of the energy committee. About 11 months ago, the PM had appointed Shaikh the chairman of all economy-related committees including the CCOE.
Umar directed the National Electric Power Regulatory Authority (Nepra) chairman to perform the circular debt audit. The CCOE chairman questioned the authenticity of the circular debt figures, suspecting that the power distribution companies may have fed wrong data.
"The CCOE was informed that in order to maintain transparency and uniformity in data related to the circular debt, a new format of reporting is being consulted with Nepra," said a statement issued by the Ministry of Planning.
According to the ministry, the committee also directed Nepra to ensure the accuracy and integrity of the circular debt data. The inter-corporate circular debt is the difference between the cost of energy and payments received by power producers and fuel suppliers. The gap remains due to low recovery of bills, high technical losses and theft, and unpaid subsidies on account of various special relief packages.
The reliability of data being provided by the Power Division has been questioned by independent experts, the International Monetary Fund (IMF) and Nepra. The power sector regulator gave a presentation to Prime Minister Imran Khan a few weeks ago and said the actual circular debt was far higher than what the energy ministry was claiming.
Minister for Power Omar Ayub Khan and Special Assistant to Prime Minister on Petroleum Nadeem Babar had claimed on a number of occasions that the growth rate of circular debt had declined from Rs38 billion per month during Pakistan Muslim League-Nawaz (PML-N) government's tenure to Rs15 billion per month in the current Pakistan Tehreek-e-Insaf (PTI)'s administration.
Under the original circular debt reduction plan agreed with the IMF, the government had to slash the gap between payables and receivables from Rs465 billion in 2018 to Rs75 billion by December 2020.
However, now the deadline has been relaxed to 2023 in the revised plan. Nepra claims the actual circular debt in first year of the PTI government reached Rs492 billion, higher than the Rs465 billion claimed by the Power Division. The Nepra chairman told the prime minister that the circular debt had peaked to Rs1.93 trillion. The regulator maintained that the circular debt had increased by about Rs492 billion in fiscal year 2018-19 at a monthly average of about Rs42 billion rather than the Rs10-12 billion per month as claimed by the ministry.
The Power Division put the overall circular debt, including the fresh payables and old stock parked in Power Holding Private Limited (PHPL), at Rs1.882 trillion as of January 31, 2020, including the PHPL debt of Rs807 billion.
As against the claim of monthly increase of Rs15 billion, Nepra believes the debt was going up at a higher pace and there was an addition of Rs42 billion in January 2020.
The CCOE also reviewed the progress of Central Power Purchasing Agency (CPPA) on the introduction of a competitive trading-based energy market. The committee was informed that various actions required for the development and introduction of the new market system were being undertaken as per the given timelines.
The CPPA briefed the CCOE on the next steps in the process. While emphasising the timely completion of the reform process, the CCOE directed the CPPA to ensure that inputs from all stakeholders including the current participants in the energy market were received.
The committee directed the authorities concerned to regularly report the progress on the introduction of the competitive bilateral trading system in Pakistan's energy market.
The CCOE was apprised that sufficient stocks of all petroleum products were available in the country, however, due to the coronavirus pandemic, the demand for petroleum products had dropped sharply.
High-speed diesel consumption has gone down by more than half while petrol consumption too fell by 41%. The CCOE asked the Ministry of Energy to take necessary steps to enhance the national storage capacity of petroleum products.
The committee referred the determination of fuel prices to the Economic Coordination Committee (ECC) of the cabinet for its decision.
Published in The Express Tribune, March 28th, 2020.
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