Circular debt rises to Rs131 billion

Circular debt now stands at an approximate Rs131b, significantly higher than the previous estimate of Rs116b.

ISLAMABAD: Circular debt amongst electricity distribution and oil marketing companies has risen between 10 and 15 per cent due to the destruction caused by the floods and the non-payment of electricity dues by Islamabad and the provinces.

Circular debt now stands at an approximate Rs131 billion, significantly higher than the previous estimate of Rs116 billion.

According to sources, the destruction caused by the flood has disabled electricity distribution companies from billing the affected areas. Resultantly, the companies have failed to recover dues from these regions.

The recovery of dues from affected areas is not going to be possible till the restoration of infrastructure.

Meanwhile, the distribution companies are strapped for cash and unable to pay oil companies for their fuel.

Outstanding dues will have to be billed in parts to the consumers but the government will have to compensate the electricity distribution companies for the shortfall in the meantime so that the dues to oil companies may be paid.

If the federal government decides to waive the electricity dues of consumers in affected areas, the Pakistan Electric Power Company (Pepco) will have to incur these dues in the form of a government subsidy.

Disputed

According to sources, an amount of Rs128 billion remains outstanding from Islamabad and the provinces in the form of electricity dues to distribution companies.

The Karachi Electric Supply Company (KESC) owes Pepco between Rs35 and Rs40 billion, while Sindh owes more than Rs26 billion.

Similarly, the provinces of Punjab and Balochistan also owe Pepco billions of rupees.

Sources claim that the provinces have refused to honour their debts without a reconciliation of accounts.

It has been learnt that a committee headed by the prime minister comprising the federal minister for finance, the federal minister for water and power and the federal minister for petroleum has been formed to address this issue.

While negotiations with Sindh have been extremely difficult, Khyber-Pakhtunkhwa has also demanded the payment of royalties owed before it honours its electricity dues.

Published in The Express Tribune, August 21^st, 2010.