No let-up in circular debt crisis
In yet another significant deterioration, the fixed rate debt reduced from 26% to just 22.6% of the domestic debt, increasing the interest rate risks. PHOTO: file
Government efforts to address the chronic issue of circular debt have failed to create any impact as there is no improvement in the situation, the power division has informed the Cabinet Committee on Energy (CCoE) in a report.
In the Circular Debt Report for June 2024, the power division admitted that debt continued to rise. The report did not mention the total amount of circular debt, but according to sources, it stood at around Rs2.5 trillion.
Soon after Shahbaz Sharif-led government came into power, the power division started raising the issue of net metering, rather than focusing on reducing the circular debt. The report said that the power division was taking significant steps to address the losses related to the distribution companies (DISCOs).
Based on the decisions taken in meetings on March 4, 2020 and March 27, 2020, the CCoE had directed the Power Division to present figures on billing, collections, and circular debt of the power sector on a regular basis for consideration.
The CCoE had also directed the National Electric Power Regulatory Authority (Nepra) to ensure the integrity of the data contained in the report. Accordingly, the Circular Debt Report for June 2024 was shared with Nepra on June 30, and then presented to the CCoE's after data verification.
During discussion in the CCoE meeting, It was highlighted that the debt was still accumulating. The chairman of cabinet committee enquired about improvements in the circular debt situation compared to fiscal 2023. The power division replied that there had been no improvement.
The committee chairman expressed concern and directed for the implementation of a robust system with technological integration to reduce wastage and theft. The division said they were working with the World Bank and the Asian Development Bank (ADB) to curb power theft by introducing smart meters.
In this regard, the committee was informed, new boards of directors for DISCOs had been established, and positive results were expected in the future. The committee suggested strict action against DISCO officials in case of negligence in mitigating power theft and poor performance.
The committee also directed the power division to formulate a viable and result-oriented plan with clear timelines to address the issue. The division informed that they would present a comprehensive plan to the committee.
The planning minister suggested that a Management Information System (MIS) was required for the power sector to monitor theft at the grid level. The power minister responded that they planned to address the issue down to the meter level through the introduction of smart meters.