Energy sector debt: Ministries asked to pay Rs25b by next month

The money is to be paid to PSO, independent power producers to begin clearing circular debt.

ISLAMABAD:

Prime Minister Yousaf Raza Gilani ordered finance and water and power ministries on Friday to pay Rs25 billion to Pakistan State Oil (PSO) and independent power producers (IPPs) by the middle of next month, initiating the process of clearing the circular debt haunting the power sector for over a decade.

The payment is likely to enable the IPPs to maximise the power generation capacity and reduce the durations of power outages, especially during the Eid holidays, a handout said.

The prime minister gave the orders at a meeting of a committee formed two weeks ago to suggest ‘out-of-the-box’ measures to overcome power shortages. The power shortfall so far has been as high as 5,000 megawatts, causing lengthy power outages, sparking public protest in several cities and towns across the country.

Presided over by Gilani, the meeting was also attended by Finance Minister Dr Abdul Hafeez Sheikh, who is the chairman of the committee, Water and Power Minister Syed Naveed Qamar and the acting governor of the State Bank of Pakistan (SBP), Yaseen Anwar.

The prime minister directed the committee to immediately resolve the issue of circular debt. The finance minister informed the meeting that the committee would submit its recommendations to the cabinet next month.

Known as circular debt, the spiraling debt has been forcing independent producers to operate much below their actual installed capacity.

The actual figures for circular debt are not known, but according to media reports it may be between Rs300 and Rs400 billion.

The premier had tasked the committee to look into ways and means to clear the circular debt once and for all.

“The focus of the committee will be on bringing this down to around Rs100 billion…if that is achieved, we can safely say power crisis in Pakistan is over,” an official then said when the panel was formed on August 7.  Officials said on Friday that the government would pay more money to clear the circular debt in phases.

Published in The Express Tribune, August 20^th, 2011.