Circular debt: Power generation companies struggle to make ends meet

Finance ministry asked to release Rs4b to keep the plants running.

ISLAMABAD: The finance ministry has been asked by fellow ministry of water and power to release Rs4 billion as cash-starved power generation companies find it hard to make ends meet.

Cash flows of power generation companies (Gencos) have dried up amid the circular debt and need capital to arrange fuel in order to keep the plants running.

The ministry of water and power had earlier requested the finance ministry to release Rs10 billion earlier but an amount of Rs6 billion was only released.

Despite the injection of Rs136 billion by the government to reduce the circular debt, the current volume stands at a massive Rs400 billion, a senior official of Ministry of Water and Power told The Express Tribune.

Meanwhile, power generation levels rose on Monday as 900MW was added into the system, according to a statement issued by ministry of water and power. Due to the improvement, the gap between demand and supply has decreased and with it also the outages. As per detail, technical faults of AES Lapir and Hubco power plants have been rectified.

100MW is being added by Halmore power plant after resumption of 19 million cubic feet per day (MMCFD) of gas while another 100MW added from Kapco’s power plants. Power generation has reached 9,500MW while demand stands at 13,500MW in peak hours.

Another 700MW from four independent power producers are expected to be added into the system by Tuesday night.

The Minister for Water and Power, Syed Naveed Qamar has directed concerned authorities to utilise all resources to run power plants at maximum capacity in order to further reduce the gap.

After the addition of 900MW on Monday and another 700MW within the next 24 hours, the duration of load shedding will come down in the major cities.

The level can go up more if hydel generation operates at its maximum capacity. Drastic decrease in water levels in dams on account of enormously low inflows has taken hydel generation down to 1,200MW to 2,200MW against total power generation capacity of 6,400 MW.

Ministry of Water and Power believes that outages will reduce in the coming month with inflows increasing in dams.

Published in The Express Tribune, March 27^th, 2012.