# Circular debt to be Rs50-60 billion by July 2020



## Kabotar

https://www.brecorder.com/2019/04/08/486813/circular-debt-to-be-rs50-60-billion-by-july-2020/


----------



## 313ghazi

Please note the article also states when the Govt took over it stood at Rs600 billion.

---

Corrected thanks to @Kabotar

Reactions: Like Like:
10


----------



## Kabotar

* ‘Circular debt to be Rs50-60 billion by July 2020’ *


BR Research April 8, 2019
_An interview with Nadeem Babar, Chairperson Energy Reforms Task Force_

_Nadeem Babar is a senior executive with extensive worldwide experience in power generation, infrastructure finance and corporate finance. During his career, he has developed, financed and/or managed over 150 power plants of all commercially available technologies, as well as other energy sector assets. He has also been involved in social sector development, especially education._

_Mr. Babar started his career as in investment banker in the Project & Structured Finance Group at the investment banking firm of Drexel Burnham Lambert in late 80s. Later, he became a partner in a boutique investment bank focusing on the energy sector. He moved to the corporate sector in 1995 from his last investment banking position at Credit Suisse First Boston where he specialised in International Project Finance. Initially at Coastal Power, and then subsequently at El Paso International after the merger of Coastal Corporation and El Paso Corporation in February 2001, Mr. Babar headed the power business first for Asia, and then globally for these companies._

_Mr. Babar was founder and CEO of Orient Power Company (Pvt) Limited until August 2018. He has served on numerous boards in the past. Currently, he serves as the Chairperson of Task Force of Energy Reforms. He is also the Board of Port Qasim Authority, Sarmaya-e-Pakistan and an independent director on the Board of Samba Bank. He is the Chairman of the Board of Progressive Education Network, a section 42 companies that runs 226 schools adopted from the government, with over 48,000 students._

_Mr. Babar holds a M.S. in Civil Engineering Management from Stanford University, a B.A. in Economics from Columbia University and a B.S. in Civil Engineering from Columbia University. He was elected to Phi Beta Kappa (Liberal Arts) and Chi Upsilon (Civil Engineering) honor societies for academic excellence._

_BR Research sat down with Mr. Babar where he discussed at length the issues faced by the government in the power sector as soon as it took power, the circular debt situation and the way forward. The edited transcripts of the conversation are produced below:_

*BR Research: Let’s start with what you inherited when the government took charge.*

*Nadeem Babar*: I would first like to explain two major concepts before going to what challenges we faced in the power sector when we came to the office. The first is net hydel profit, and the second is how NEPRA sets tariffs.

The formula for net hydel profit was set 30-40 years ago by AGN Kazi. At that time, there was no private generation, everything was under WAPDA. He coined the term net hydel profit where the idea was to distribute a part of the profit made by WAPDA on hydel generation to the province that provided the hydel source. Unfortunately, as the time passed, there was a general realization that the formula was not only ambiguous and incorrect in some cases, but also not implementable. And eventually the concept of net profit for WAPDA completely changed after new thermal generation capacity started coming online in both the public and the private sector.

KP and Punjab receive a share of net hydel profit, and recently it has been decided that AJK would be getting its share of the profit soon after the completion of Neelum Jhelum Project.

About 10-11 years ago, the federal government stopped releasing funds regularly to the provinces under the argument that the Kazi Formula for net hydel profit is not workable. Roughly about the same time, Council of Common Interests (CCI) was formed after the 18th Amendment, and electricity was shifted to Federal Legislative List Part 2, which essentially meant that all policy related approvals for electricity now rested with the CCI.

The CCI being a representative of the federation as well as the provinces was in constant tussle with the provinces over the disbursement of funds and the workability of the net hydel profit formula. Paying royalty on water became even more complicated with NEPRA in the play as it was part of the generation cost.

Eventually in 2015-16, an agreement was signed between the federal government and the provincial governments of KP and Punjab where KP and Punjab government agreed to the arrears payable to them up until that point; and moving forward until any resolution of the different interpretations of the AGN Kazi Formula was resolved, a rate of Rs1.10 per kilowatt hour was used by NEPRA–irrespective of “profit”.

Keeping in mind that up until the time of the agreement, Punjab had received relatively small amounts, while KP did get some disbursements every now and then, Punjab had a larger share in arrears than KP. Roughly, Rs153 billion was the amount payable in arrears to the provinces where Punjab was owed around Rs82 billion, and KP was owed around Rs71 billion. It was decided that these amounts would be paid in a phased manner in the next 2-3 years.

NEPRA’s tariff determination for the next year is based on DISCOs’ purchase cost in the current year and future commitments in the coming year adjusted for prior year adjustments, which could be positive or negative. At present, the fuel price adjustment takes place every month with about a two-month lag. All other costs – whether it is new plant additions, or exchange movements on fixed cost, or interest rate movements, or taxes etc. – are adjusted quarterly now. In the past, these were adjusted annually.

NEPRA determines tariffs for all the ten DISCOs individually. Historically, NEPRA used to send these tariffs to the government where DISCOs with lower losses had lower tariffs and those with higher losses had higher tariffs; and the government would then announce a uniform tariff across the country for a particular type of customer, which used to be the lowest tariff amongst all DISCOs. The difference between the NEPRA approved tariffs and the tariffs notified by the Ministry was the tariff differential subsidy (TDS), which the government paid to equalize the gap.

More than a year ago, an amendment was made to the NEPRA Act, which everyone is now criticizing and will probably result in further amendments. A new mechanism was introduced where NEPRA could announce uniform tariff. Effectively, what it meant was that rather than the government equalizing the tariff, NEPRA should determine the tariffs, equalize and announce one uniform tariff for a particular slab or customer category. With this amendment, the government lost its right to put surcharge on high-end customers, which it used to offset some of the TDS. This is where we stand today.

With this background, we come to the main problem that this government faced when it took office at the end of August 2018. There was Rs226 billion of prior year adjustments that the previous government had decided not to pass on. Two major portions of that were the net hydel profits, and the capacity payments incurred on CPEC energy projects that had started operating. These prior year adjustments not passed on were based on the indexations that NEPRA had to apply only till the end of 2017; all capacity payments on new additions and the 35 percent exchange movement since the beginning of 2018 up until now had also not been passed on. So, in todays indexed, corrected and passed on cost, we are looking at Rs425billion additional amount that has to be put in the bills.

DISCOs had not been updating their costs to NEPRA for tariff determination for two years due to political pressures, and it was only after the previous government left the office and the interim government took charge that the DISCOs submitted the information that NEPRA had been asking for tariff determination. The existing tariff was at Rs11.71; and in October 2018 – NEPRA notified a tariff of Rs15.31 after incorporating the prior year adjustments of Rs2.18 up until 2017, plus around Rs1.6 for the ongoing year until October 2018. Technically, when the PTI government came into power, the rate should have been around Rs14 had Rs2.18 on account of prior year adjustment having been passed into the rate already. But since it wasn’t, NEPRA proposed a tariff increase of Rs3.82.

There was a lot of debate on this when the matter was taken to the ECC; on one hand, we faced the issue of such an enormous increase in tariffs after only one month of taking charge; on the other hand, the KP government was banking on receiving the net hydel profit disbursement of Rs70+ billion in the current year out of its total development budget, and the CPPA was waiting to pass on the remaining capacity payments for the additional CPEC projects that had come online. After much debate and discussion between the government and NEPRA, the cabinet eventually increased the tariff only by Rs1.27 in January 2019, with further increases to come later in various stages, all to account for past cost not having been passed through.

*BRR: What is the deal with the circular debt? Where does it stand?*

*NB:* Let’s start from 2018. In January 2018, circular debt stood somewhere between Rs450-475 billion. The government at that time decided to clear Rs200 billion; between January and May 2018, the then government paid Rs150 billion by borrowing, and another Rs50 billion was sought approval in the last week of the PMLN government, but that never got disbursed. On June 30, 2018, the circular debt stood at Rs600 billion even after all the payments that were made. Why? Because they did not take into account the circular debt being generated during five months of 2018 i.e. Jan-May.

In 2016 and until latter half of 2017, the government was following a policy of revenue-based load shedding, which technically meant that high loss areas had higher load shedding. This kept the circular debt from crossing Rs300-325 billion at any time. In late 2017, the government decided to change this policy and load shedding was reduced to minimal levels ahead of elections; and in the next six months leading up to the elections, there was an additional Rs100 billion circular debts created because of this change in the policy.

The actual creation of circular debt in FY18 that included 11 months of PMLN government and 1 month of interim government was Rs453 billion–about Rs1.3 billion per day. Essentially, three extraordinary elements contributed gigantically to this sum. One, other than the TDS, there was Rs175 billion worth of unfunded subsidy i.e. announced by the government, passed onto the customer, but never paid to the distribution companies. This included no allocations made for the subsidy that was announced and was being paid under the industrial support program and the agri support program for cheaper electricity. Also the Balochistan tube wells subsidy and AJK subsidy remained unfunded.

The second element was changing the revenue-based load shedding policy. Third was not incorporating and passing on the actual cost that the government had agreed with the provinces as NHP and paid to new projects as capacity payment. The fourth element, which wasn’t new, was the continued losses that added to the circular debt stock. On a consolidated basis, AT&C losses were around 24 percent for 2016-17. These increased to 29 percent for 2017-18 – the highest ever. This is all what the new government had to contend with when it took charge.

*BRR: Where does it stand now given that you have been in power for the last 6-7 months?*

*NB:* The rate increase of Rs1.27 came into effect on January 1, 2019 after a couple of months of deliberation, debate, and review. Government told NEPRA that the tariffs cannot go up by Rs3.82 in one go. What was essentially done was that some tariff rationalisation where the increase proposed was reduced from Rs3.82 by about 50 paisa and NEPRA was asked to spread it over a two-year period – Rs1.27 of which has already been jacked up in January. Let me remind you that out of the remaining Rs2.15., there is a one-time element in the shape of prior year adjustments, which will drop off once it is recovered over the two-year time period.







Coming to your question now; the consequence of all this was a higher run rate of circular debt for the 1HFY19 as the tariff increase came into effect only in January 2019, which translates roughly into a circular debt of Rs220-230 billion for the first six months which is the same run rate that was continuing in 2017-8. However, this number will come down to Rs100-110 billion for 2HFY19, which means that the circular debt being created for the ongoing fiscal year, 2018-19 will stand around Rs320-330 i.e. Rs100 billion lower than what it was in 2017-18.

In 2019-20, two more rate increases would have to come into effect as per NEPRA, and our estimates show that the circular debt for the year 2019-20 would drop to Rs110 billion. And when the following fiscal year starts in July 2020, our estimates suggest that the circular debt will be down to Rs50-60 billion for the whole year, which would be manageable.

*BRR: What policy is the government adopting for load management now?*

*NB:* We have gone back to the previous regime where any feeder with AT&C losses of less than 20 percent will not have any load shedding. Around 50-60 percent of the feeders in the 10 DISCOs have no load shedding policy because their AT&C losses are below 20 percent. We have four categories of losses for load management: 20, 30, 40 and above 60 percent. On average, total revenue based load shedding, based on this policy in the country is around 2500MW. However, wherever the AT&C losses drop down, the revenue based load shedding is reduced accordingly.

*BRR: Can you tell us a bit more about the unfunded subsidies? What is government doing to address this problem?*

*NB:* In November 2018, when all this was being debated in the Cabinet, I made an impassioned plea to the Prime Minister and the Finance Minister to stop the practice of unfunded subsidies if things are to be fixed. They both readily agreed. The Finance Minister was right in saying that he had no budgetary room for more subsidies and has committed to pay the subsidies for zero-rated export sector, which amounts to Rs24 billion.

Programs like agri support where electricity is being charged at Rs5.35, and industrial support program where industries are getting a discount of Rs3 are continuing as it is difficult to finish them. However, the government was able to solve the AJK issue in the Cabinet where rate has been increased to Rs5.79 versus the previous rate of Rs2.73. The ECC has approved it and it will be in effect soon.

A large part of the Balochistan tube well subsidy that has both the provincial as well as a federal component has not been paid for the past 10 years. This subsidy is the single largest component or around Rs197 billion in the Rs950 billion receivables of the DISCOs from all types of customers. Ten years ago, the estimated cost of a tube well at that time was calculated to be Rs75,000. And agreement was reached back then that the farmer will pay Rs10,000 of the cost, while the federal government and the Balochistan government will pay 40 and 60 percent of the remaining Rs65,000. In case the cost was above Rs75,000, the excess was to be paid by the farmer. To address this situation for the future, the government has planned to solarise all these tube wells in Balochistan. This will take at least two years, and we have found international donors as well as commercial companies that are interested.

*BRR: If you could summarize, what are the key focus areas for the government today?*

*NB:* Against this backdrop, I identified a few areas for the government in late September last year. After several rounds of meetings with the PM, ECC, CCoE we agreed to follow these areas, which should bring down the run rate in the circular debt to Rs100-150 million a day by July 2020.

First, there will be no unfunded subsidy in the upcoming budget. Second, DISCOs must recover the prior year actual costs. Almost 50 percent of these past costs have to go to the two provinces in shape of net hydel profit, while the remaining 50 percent is the additional capacity payment that remains unrecovered. As I mentioned earlier, there is a time horizon for this. In case we don’t drop off once these costs are recovered and keep them part of the tariff for some time we can actually generate money to retire all the circular debt that was parked on the balance sheet of Power Holding Company earlier. If we drop these items off, we will have to deal with the circular debt separately through a longer program.

Third is the theft control program that was launched mid-November 2018 in Punjab, and mid-December in Sindh and KP. Effectively, we have 2.5-3 months’ worth of data, which shows that we have been able to increase revenue by Rs42 billion in this time, out of which Rs20 billion has come from higher units sold and hence higher rates charged since January 2019, and Rs22 billion has come purely from reducing AT&C losses. The AT&C losses have come down by 1.8 percent in 2.5 months. Our target is to bring the AT&C losses down by 3-4 percent to 25-26 percent by the end of June 2019. The target for next year i.e. FY20 is to bring it down to 22 percent, which would essentially mean that we would have contained the leakage to about 6 percent given that NEPRA’s threshold for AT&C losses is 16 percent.

The theft control program has two parts: law enforcement and technology intervention. Law enforcement is in full swing; there are over 20,000 FIRs registered against electricity theft; more than 2000 customers are in jail; more than 500 government personnel are behind bars. On the technology side, we are trying our best to reduce manual intervention to minimal.

Coming to the last item; we have to reduce our generation cost. Our average, generation cost is high and 42 percent of it is based on imported fuel. In the last one year, the cost of generation has gone up by Rs1.5 per unit only from the 35 percent currency depreciation during the year. Our average weighted basket cost of generation at all the plant gates in January 2018 was about Rs10.5. And the actual T&D costs were around Rs2.10-Rs2.15, which included the distribution and transmission staff costs, O&M costs, etc. So, the true cost of delivery without taking into account the losses was around Rs12.7. After including the 16 percent allowed losses by NEPRA, the true cost of delivery would mean a cost of over Rs14.5. Adding the 13 percent disallowed losses – 29 percent total losses minus 16 percent allowed losses – the figure would be over Rs16. So there was a big gap between this figure and the weighted average rate of Rs11.71 at that time, which was piling up and going into circular debt.

Also, we have to realise that we cannot just look at the present day analyses; we have to look at the future implications over the next five years. One of the first things I told the government was that we need to plan our generation on the basis of a 25-30 year forecast preferably month by month. The PM was very supportive; so I launched something I called Pakistan100, which for me is a 28-year plan for power; I will follow this for the petroleum side and then integrate the two. The first draft for power has been submitted. The idea behind this analytical exercise is to get out of these alternating cycles of shortages and excesses; start planning at the generation level and match it with transmission and distribution planning; redirect our fuel mix by policy; shutdown a good chunk of power plants from the existing fleet that are too inefficient; and change the forex dependability.

*BRR: We’ve been hearing about smart metering for some time now? Is the government doing anything in this regard?*

*NB*: Yes. To curtail losses, we are launching the AMI Program, which is the smart metering system. We have received the first tender for IESCO, funded by ADB. This month we are launching for LESCO. And by the end of the year, we will be floating the tenders for PESCO, HESCO and SEPCO. AMI or Advanced metering infrastructure is an integrated system of smart meters, communications networks, and data management systems that enables two-way communication between utilities and customers. There has been a lot of controversy around this idea in the past, but that has been addressed, and I believe that the program should be effective.

*BRR: When do you expect to see smart meters at the household level?*

*NB:* Converting all meters to smart meters across the country is a five-year program. If you talk about IESCO, the contract will be awarded in June this year and the program is for 2 years. LESCO contract is expected to be awarded in July 2019, and it will also take around two years.

*BRR: One issue raised on the AMI is the local meter manufacturers don’t qualify due to some conditions in the ADB contract, which technically means that the equipment will be imported. They argue that this would affect local business and job creation that could get a boost otherwise. What’s your take on this?*

*NB:* This is half true. They have approached the High Court in Islamabad. The tender has some technical and some financial conditions for you to bid. Initially when the program was conceived some 4 years ago, technical conditions proposed that if you are a sole bidder, you need to have the experience to deploy these kinds of devices in at least 3 locations globally, which these local players didn’t have. The current tender says that if you are part of a consortium, at least one member of that consortium has to have experience in 3 locations. It further says that if you want to be a named subcontractor, you need experience in one country, which could be your own. The local players technically qualify the subcontractor condition. So local players can meet these conditions either as part of a consortium or a subcontractor.

On the financial side, there are two triggers. The first one is that the annual turnover of the single bidder or the consortium should be $80 million for last three years. Second condition is that if you are part of a consortium, then as a member of the consortium to have to have an annual turnover of $20 million for last three years. According to these local players, none of them qualify the $20 million annual turnover condition. It is my belief that at least PEL qualifies.

*BRR: Coming to generation, what are your plans and targets going forward?*

*NB:* Our current name plate capacity is 33,000MW, while 26,000MW is the dependable capacity. By 2030, we plan to increase generation capacity to 52,000MW; and the imported fuel component of generation that stands at 42 percent today, we plan to bring it down to 20 percent by 2030.

In the next 5-10 years, our main focus will be on renewable energy; the hydel plants that are in process – committed and identified; Thar coal plants that are awarded, in construction or in various stages of contracting; and finally three nuclear plants under construction. The policy is strictly no new imported coal plant; no new imported LNG plant. By 2030, hydel and renewables would account for 65 percent.

*BRR: Renewables have a criticism that they cannot become the base load because of fluctuation in power generation as well as the demand in that area. But your targets seem to show that at 65 percent, renewables will become the base load. How do you address this query?*

*NB:* We are bringing a new renewable policy, which will address these issues. The new policy has a radically different approach. The cost of renewables at this time is in most cases lower than the fuel cost of oil, and in some cases RLNG. If inducting renewables lowers our average cost of generation, then we are not worried about additional capacity because it improves our financials. It is correct that variable renewable energy (solar and wind) causes problems of voltage fluctuation for the weak grid that we have.

How we plan to counter this is by setting a target for renewable share and identifying what we need to do for the grid to absorb them at the least cost without any variations. We have just signed up with the World Bank for a study of the entire country on resource mapping together with interconnection mapping, which they have promised to finish in 6 months. There is another study being conducted in parallel by Lahmeyer, Germany funded by the World Bank to identify what points in the main grid need strengthening if we plan to increase renewables to 20-25 percent in the system. Based on the results of these studies, our new policy includes capacity auctions every year for solar, wind and biomass.

*BRR: What is stopping you from commercialising solar panels in the residential and commercial sector especially when we need to increase indigenous generation?*

*NB:* Nothing is stopping us. If the new renewable policy is approved as is, it has an entire section on this issue. I have proposed to completely open up this segment: billing, net-metering, wheeling and excess being sold back. This will attract resistance though. DISCOs have a legitimate concern that their better paying clients will start to shift and we have to address this concern through market forces.

*BRR: Coming to furnace oil, what is the way forward?*

*NB:* Back in November, when the refineries threatened to shut down, I was called in to sit with them. We have had three rounds of negotiations with all the refineries and we reached an understanding on a long term program. We have worked out a two staged program. In the first phase, the refineries need to have their export channels developed as soon as this summer is over.

We are going to add some minor infrastructure at the port to have reversed pumping and reverse decanting to fill a ship with FO for export. PSO has been instructed to remodel the storage capacity to increase the pumping capacity by the end of this summer to be able to ship out a cargo of 50-60K tons every 10 days. Our production of FO is about 300,000 tons a month.

The next step is that like the new refinery policy with tax concessions, we are going to give a 5-year window to the existing refineries with similar concessions to upgrade. We have also suggested that rather than every refinery having its own hydrocracking unit, they should all have a single unit in the country that should do the job. To recap, refineries will export furnace oil for the next two years where we will give them some financial incentive in the first six months as FO is a negative margins product due to import price parity. After that, they have to compete on their own or go to deeper conversions.

Reactions: Like Like:
1


----------



## Kabotar

313ghazi said:


> Please note the article also states when the Govt took over it stood at Rs453 billion.





Kabotar said:


> *BRR: What is the deal with the circular debt? Where does it stand?*
> 
> *NB:* Let’s start from 2018. In January 2018, circular debt stood somewhere between Rs450-475 billion. The government at that time decided to clear Rs200 billion; between January and May 2018, the then government paid Rs150 billion by borrowing, and another Rs50 billion was sought approval in the last week of the PMLN government, but that never got disbursed. On June 30, 2018, the circular debt stood at Rs600 billion even after all the payments that were made. Why? Because they did not take into account the circular debt being generated during five months of 2018 i.e. Jan-May.



Kindly read carefully. Rs.600B from previous than add similar amount from caretaker government.

Reactions: Like Like:
2


----------



## 313ghazi

Turingsage said:


> Amazingly Imran is going to leave a far bigger debt problem than Nawaz or Zardari according to the IMF. But the PTI retards refuse to see whats in front of their face and attribute all ills on Nawaz. Funny if it was not sad.



You know you are doing well when your enemies are criticising you. No Indians ever used to post about the economy with their father Nawaj Sharif was in charge. This IMF prediction is all blowhard nonsense trying to force Pakistan into a corner *based on a deliberately pessemisitic estimate*. I hope you're still around in 5 years time.

Reactions: Like Like:
 9


----------



## Yaseen1

govt has made electricity expensive and will make its price much higher to reduce debt but it will badly affect common public unless they control power theft this will be temporary solution and will put burden n public paying electricity bills.I not think this is extraordinary achievement as those paying bills will pay for those stealing electricity


----------



## 313ghazi

Yaseen1 said:


> govt has made electricity expensive and will made its price much higher to reduce debt but it will badly affect common public unless they control power theft this will be temporary solution and will put burden n public paying electricity bills



Look at the article...



> The theft control program has two parts: law enforcement and technology intervention. Law enforcement is in full swing; there are over 20,000 FIRs registered against electricity theft; more than 2000 customers are in jail; more than 500 government personnel are behind bars. On the technology side, we are trying our best to reduce manual intervention to minimal.



Then on the tech side;



> *BRR: We’ve been hearing about smart metering for some time now? Is the government doing anything in this regard?*
> 
> *NB*: Yes. To curtail losses, we are launching the AMI Program, which is the smart metering system. We have received the first tender for IESCO, funded by ADB. This month we are launching for LESCO. And by the end of the year, we will be floating the tenders for PESCO, HESCO and SEPCO. AMI or Advanced metering infrastructure is an integrated system of smart meters, communications networks, and data management systems that enables two-way communication between utilities and customers. There has been a lot of controversy around this idea in the past, but that has been addressed, and I believe that the program should be effective.
> 
> *BRR: When do you expect to see smart meters at the household level?*
> 
> *NB:* Converting all meters to smart meters across the country is a five-year program. If you talk about IESCO, the contract will be awarded in June this year and the program is for 2 years. LESCO contract is expected to be awarded in July 2019, and it will also take around two years.


----------



## Imran Khan

i can wait two more years then things will be fully clear

Reactions: Like Like:
3


----------



## Turingsage

313ghazi said:


> You know you are doing well when your enemies are criticising you. No Indians ever used to post about the economy with their father Nawaj Sharif was in charge. This IMF prediction is all blowhard nonsense trying to force Pakistan into a corner *based on a deliberately pessemisitic estimate*. I hope you're still around in 5 years time.



I can see that you certainly are not, as you are happy living in the UK and never ever likely to live in Pakistan. I am not criticizing at all. I am delighted that Pakistans new democratic front man will make things worse and no one is forcing you to beg for loans from the IMF. Its your choice and you are continuing in that great tradition for going to the IMF for the umpteenth time and certainly not for the last time


----------



## Yaseen1

most of theft occurs in tribal areas of balochistan and I not think theft is controlled as govt is increasing price for ordinary customer of electricity which shows theft is not controlled otherwise there is no need to put burden on poor public


313ghazi said:


> Look at the article...
> 
> 
> 
> Then on the tech side;


----------



## 313ghazi

Also debt as a percentage of GDP alone is not a measure of anything. What the debt has been spent on, how much money the country is making and the ability to pay back debt is what matters.

Look at this table;






If the debt is because you've been subsiding food, electricity, villas for politicians and bank balances for their next 10 generations - then it will ruin you. 

If the debt is because you've been spending on things that will help growth, like infrastructure, setting up industry, training workforce, investment in businesses - then that spending will generate revenue to help you pay back debt.



Turingsage said:


> I can see that you certainly are not, as you are happy living in the UK and never ever likely to live in Pakistan. I am not criticizing at all. I am delighted that Pakistans new democratic front man will make things worse and no one is forcing you to beg for loans from the IMF. Its your choice and you are continuing in that great tradition for going to the IMF for the umpteenth time and certainly not for the last time



That's funny coming from an Indian who left the land of cow piss and honey for the UK too. I am a Pakistani passport holder, i can come and go as a i please - i don't need approval from the likes of you. 

The whole point you people are trying to propagate is that IK will make things worse - it's contrary to all the facts and it's clear as day that this is a sustained campaign by the Hinduvata RW troll army. You guys are too obvious. You come in waves, you all come with the same news, and you're tactless where you post it. The old school trolls would work it in nicely - you younger ones aren't earning your keep. 

How much do they pay you per day? Is it in rupees or GBP?



Yaseen1 said:


> most of theft occurs in tribal areas of balochistan and I not think theft is controlled as govt is increasing price for ordinary customer of electricity which shows theft is not controlled otherwise there is no need to put burden on poor public



There are 11 million people in Balochistan, they could all be stealing electricity and we'd struggle to generate this much debt. The problem might be most prevalent there, but it's all over the place. Electricity theft is common in AJK too. 

Your right it's not under control yet - but it will be by the end of this governments term.

Reactions: Like Like:
3


----------



## Turingsage

First of all I was born in Uganda and consider Uganda to be second country after the UK. I have no great love of India or Pakistan. I do not hold a Indian passport nor have a desire to have one. 
As for Hindutwa the last time I attended a temple was many years ago only as a social necessity since I had the intelligence at age 13 that ALL RELIGIONS consist of dupes and charlatans that prey on the semi-intelligent of this world.
Your debt problems are very real and no amount of deceit and self deception is going to cure it

Reactions: Like Like:
1


----------



## Pakistani Aircraft

Pakistan Tehrik-e-Baqwas is taking Pakistan on a suicide mission.


----------



## Syed1.

Pakistani Aircraft said:


> Pakistan Tehrik-e-Baqwas is taking Pakistan on a suicide mission.


Aray bhai bhai don't strap on that jacket yet 



Turingsage said:


> First of all I was born in Uganda and consider Uganda to be second country after the UK. I have no great love of India or Pakistan. I do not hold a Indian passport nor have a desire to have one.
> As for Hindutwa the last time I attended a temple was many years ago only as a social necessity since I had the intelligence at age 13 that ALL RELIGIONS consist of dupes and charlatans that prey on the semi-intelligent of this world.
> Your debt problems are very real and no amount of deceit and self deception is going to cure it


Good deflection... maybe that's why you have the Indian flag up

Reactions: Like Like:
1 | Haha Haha:
1


----------



## Zulfiqar

A good article.

I request the mods to pin this thread in order to track the energy policy for the next five years.

@Dubious @waz

While he has mentioned PHPL where the previous governments parked the short term receivables so that it can pay it off in next 6 years but he did not mention the total amount. It was around 500 B last time I checked. 

This amount needs to be paid in next 6 years. 

That is billions of dollars of capital that could have been invested by the banks in revenue generating businesses rather than filling fiscal revenue gap.

The person being interviewed talks about furnace oil.

I attended a talk in 2009 where country head of Total Pakistan (a foreigner) was speaking. He said that you guys are paying a lot less for the energy and this needs to change. We are seeing the results now as circular debt is increasing due to revenue gap and energy theft.

He also said that pakistan needs to switch from furnace oil as refinery technology in the world is changing.

Reactions: Like Like:
1


----------



## Dubious

Zulfiqar said:


> A good article.
> 
> I request the mods to pin this thread in order to track the energy policy for the next five years.
> 
> @Dubious @waz
> 
> While he has mentioned PHPL where the previous governments parked the short term receivables so that it can pay it off in next 6 years but he did not mention the total amount. It was around 500 B last time I checked.
> 
> This amount needs to be paid in next 6 years.
> 
> That is billions of dollars of capital that could have been invested by the banks in revenue generating businesses rather than filling fiscal revenue gap.
> 
> The person being interviewed talks about furnace oil.
> 
> I attended a talk in 2009 where country head of Total Pakistan (a foreigner) was speaking. He said that you guys are paying a lot less for the energy and this needs to change. We are seeing the results now as circular debt is increasing due to revenue gap and energy theft.
> 
> He also said that pakistan needs to switch from furnace oil as refinery technology in the world is changing.


I have made it sticky.

Reactions: Like Like:
1


----------



## Zulfiqar

Dubious said:


> I have made it sticky.




Thank you, will add to this thread over time starting with PHPL next week.

Reactions: Like Like:
1


----------



## maithil

Basically plan is to make electricity costly for people . More cost leads to less demand and thus lesser circular debt. What could go wrong with such brilliant planning.


----------



## Zulfiqar

maithil said:


> Basically plan is to make electricity costly for people . More cost leads to less demand and thus lesser circular debt. What could go wrong with such brilliant planning.



The plan is to increase the tariff to actual required level in order to reach the breakeven and above point so that the following happens:


Increase in circular debt is reduced.

Overall Present outstanding circular debt is reduced.
PHPL debt is paid off (Currently over PKR 500 B plus).

In the longer run the plan is to reduce the weighted average production cost by cycling off from high cost generation units.


----------



## Zulfiqar

Industry review (Power sector)

The Power Sector of Pakistan comes under the ambit of Ministry of Water and Power, which is mainly responsible for formulating Pakistani Energy Policy and to ensure that the country’s energy needs are met. The constituent entities involved in the regulation and supervision of the sector include NEPRA, PEPCO, PPIB, AEDB, PAEC and the Provincial / AJK I&P departments. All of these entities are working under the umbrella of the Ministry, and each has been designated a specific role. Apart from the entities identified, the Power Sector also constitutes of certain power generation entities, such as WAPDA, GENCOs, Nuclear Power Plants and IPPs and other entities which are involved in the transmission and distribution of electricity across Pakistan, and include NTDC, KESC and the DISCOs. A graphical depiction of the overall structure of the power sector has been provided in the following illustration.









*Current Installed capacity (will update it later on and compare it with 2017 report)*

Installed power generation capacity of Pakistan as of 30th June, 2017 stands at 28,399 MW of which 26,186 MW is connected with NTDC system whereas 2,213 MW is connected with K-Electric Limited (KEL) system. Since 2013 till date, more than 7,000 MW has been added to the generation facilities connected to NTDC system. Based on recent information by NTDC, and analysis by NEPRA, generation capacity additions in NTDC system over a period up to the FY 2024-25 are as shown in the following table. However, the final installed capacity of more than 62,000 MW may not be achieved timely as some of the power projects including hydro-based projects indicated to be inducted from 2022 to 2025 requires extensive technical and financial prerequisites to commence operation.






*Generation capacity and demand:*

The generation capability of generation facilities connected with NTDC system will be less than the installed capacity as shown in the above table due to various factors like auxiliary consumption, impact of site reference conditions and seasonality effects on the renewables and large hydropower plants. The generation capability is effectively the capacity for meeting the electricity demand in NTDC system. The data about generation capability and future demand as reported by NTDC is shown in the following table.







*Capacity mix:*

The Government of Pakistan has been pursuing broad objectives for the power generation development including, renewable energy, moving to environmental friendly fuels and reduced dependence on imported fuels. Also diversification of fuel resources and security of fuel supply were among its priorities. The addition of different new generation technologies shown above will change the power mix of the sector from Furnace Oil-based to Coal, RLNG and Renewables as no major addition has been planned on Furnace Oil. The following table shows changes in installed capacity mix over three representative periods.







Clear trends may be noted in respect of different fuels. In the FY 2016-17 about 9,000 MW is based on Gas/RLNG, which will increase to 12,626 MW by the FY 2020-21, however no further addition is foreseen till the FY 2024-25. Oil based power generation plants have not been planned throughout the period and share of oil based generation capacity declines from 25.91% in the FY 2016-17 to 10.91% in the FY 2024-25. Share of coal-based generation increases from 3.09% in the FY 2016- 17 to 19.56% in the FY 2024-25 mainly on Thar Coal based projects. Hydro-based generation capacity also increases from about 7,000 MW in the FY 2016-17 to 20,676 MW in the FY 2024-25 representing a share of more than 33% in the overall installed generation capacity. 

*Fuel consumption in Power sector:*

The share of installed capacity of thermal power plants using oil, natural gas and coal to the total installed capacity in the country, during 2016-17, was about 63.40% while the electricity produced by the thermal power plants, during 2015-16, to the total electricity generated in the country during same period was about 64.57%. The statistics of different fuel used and their percentage share to the total fuel used for thermal electricity generation of the country from 2011-12 to 2015-16 are as follows:






*IPP review:*






The IPP is an entity, which is not a public utility, but that owns facilities to generate electric power for sale to utilities end users. The electricity market was opened to IPPs in 1990. Subsequently around 40 IPPs have been awarded tariff by NEPRA.


For several years afterwards, the IPP program remained stagnant, only to be revived as a huge power shortage hit the country in 2006-07. In a regional context, Pakistan offers a relatively sophisticated operational and regulatory framework for the IPPs.


Independent Power producers contribute significantly in electricity generation in Pakistan but unfortunately, IPPs are producing below capacity as a result of working capital shortage caused due to outstanding amount of receivables from PEPCO/NTDC.


Like most other countries, here, IPPs face single buyer market. Water and Power Development Authority is the key buyer of IPP power. IPPs negotiate a tariff with the regulatory authority, NEPRA, under a transparent competitive bidding process. Investors are generally insulated from underlying economic risks through tightly written, long-term PPAs with underlying take-or-pay contracts, supported by explicit government guarantees and credit enhancements.


The fundamental principle underlying the contractual framework is to limit, as far as possible, the risks borne by the Project Company. A fundamental assumption is that all parties abide by the terms of their contracts. 

*The IPP Electricity Tariff: *


The tariff charged to WAPDA by IPPs is not a number, rather it is computed from a formula. The formula includes in it the components of the fixed and variable costs. The total tariff is the sum of the Capacity Purchase Price (CPP) which is the fixed component and the Energy Purchase Price (EPP) which is the variable cost.

The CPP comprises:


Project Debt payments (inclusive of interest principal).
Return on Equity (Real Rate of Return over the project life)
Fixed element of the operating and maintenance cost.
Insurance cost for the plant.
Foreign Exchange Differential cost in order to cover FX variation during foreign loan payment.

The EPP comprises:



Fuel Cost which is set by the Government and above the world oil prices by an amount of a surcharge.
Variable element of the operating and maintenance cost.


The tariff paid also depends on the total hours purchased or the Installed capacity utilized.

*
The government has to pay CPP i.e fixed cost even if they don't purchase electricity from the IPP. This is one of the reasons of mounting revenue expense gap resulting in circular debt.*

*Issues prevalent in the Power Sector*


The overall power sector can be classified into 3 categories namely (i) generation, (ii) transmission & distribution and (iii) collection.

*Generation*


Poor energy mix (dependence on oil for electricity generation) 
Delay in receivables leading to reduction in generation of Independent Power Producers (“IPPs”) owing to lower ability to purchase fuel stock

*Transmission & Distribution *(“*T&D*”)


T&D losses due to obsolete infrastructure.
Tariff subsidies/delay in capacity payments.
 
*Collections*


Low collections due to pilferage/theft/law & order. In FY 2016-2017 the collection rate was 92.65% for all the DISCOS in the country. The collection rates vary significantly across geography.

*Corrective Measures for resolution of prevalent issues:*


Aggressive Fuel price adjustment in the consumer tariff allowing for robust pricing and reduction in subsidies.
Provision of new explorations licenses and induction of indigenous fuel in order to reduce dependence on imported fuel.
Investment in small hydropower plants for long term sustainability.
Floating of utility bonds for upgradation of transmission lines and grid infrastructure.
Special focus by DISCOs on high loss feeders for reduction in revenue loss.
Encouragement of capex in order to enhance local manufacturing of major equipment in generation, transmission and distribution sector (Hint Turbines e.t.c)


----------



## Max Pain

Turingsage said:


> First of all I was born in Uganda and consider Uganda to be second country after the UK. I have no great love of India or Pakistan. I do not hold a Indian passport nor have a desire to have one.
> As for Hindutwa the last time I attended a temple was many years ago only as a social necessity since I had the intelligence at age 13 that ALL RELIGIONS consist of dupes and charlatans that prey on the semi-intelligent of this world.
> Your debt problems are very real and no amount of deceit and self deception is going to cure it



what do you think should be done to cure this situation?


----------



## maithil

With ROI on Chinese plants guaranteed in Dollars, wonder how will controlling circular debt work ? With every devaluation, debt increases for each such plants.


----------



## ziaulislam

maithil said:


> With ROI on Chinese plants guaranteed in Dollars, wonder how will controlling debt work ? With every devaluation, debt increases for each such plants.


Debt has nothing to do with devaluation ? Did u go to school ?


----------



## maithil

ziaulislam said:


> *Debt has nothing to do with devaluation* ? Did u go to school ?



Sure.


----------



## ajpirzada

the important thing to note is that the govt is still to pass on the increase in energy prices from previous years. if the govt had done this all at one, we would be seeing a much higher inflation. instead the govt has decided to do this in phases. This means that circular debt will stay with us for longer time but at the cost of lower inflation.

the amount of mess the previous govt created is almost criminal!

Reactions: Like Like:
1


----------



## VCheng

ajpirzada said:


> the important thing to note is that the govt is still to pass on the increase in energy prices from previous years. if the govt had done this all at one, we would be seeing a much higher inflation. instead the govt has decided to do this in phases. This means that circular debt will stay with us for longer time but at the cost of lower inflation.
> 
> the amount of mess the previous govt created is almost criminal!



That may well be true, but there comes a time when blaming the previous government for an inherited mess stops working as an excuse. Results matter in the here and now.


----------



## Zulfiqar

VCheng said:


> That may well be true, but there comes a time when blaming the previous government for an inherited mess stops working as an excuse. Results matter in the here and now.



Results require clearing past debt/receivables of 1400 billion plus PKR or roughly 10 bill USD and not generating any further of this mess.This amount includes PHPL debt.

We have to clear 10 bill USD of dues and loans because of past govt subsidies and inefficient working of the utility sector.

The dept in an FI that I work for has nearly 30 B of the 500 B plus PHPL debt and we are stuck with it for next 5-6 years and our ratios have been affected by it. We had to pass on financing some interesting projects that required long term loans because we financed PHPL with same maturity loans.

That is a lot of liquidity stuck to plug a deficit hole.

Currently the government has launched sukuks of 10 years with a markup rate of relevant KIBOR+0.8%. This will clear up around 400 B of short term dues and spread it over ten years.

However, we cannot sustain this cycle.

Subsidies have to be removed, tariff needs to be increased, coal power plants and other cheaper sources of electricity have to be included more in the energy mix. Line losses also need to be reduced.

Only then will we be able to pay off this behemoth credit card bill.



maithil said:


> With ROI on Chinese plants guaranteed in Dollars, wonder how will controlling circular debt work ? With every devaluation, debt increases for each such plants.



There is no workable way around. You will have to pay the foreign debt in FC (either prepayment now or on maturity). In both cases you require FC. If you issue very long term FC bonds, even then you will have to book exchange loss over time till maturity of bond as our currency/economy is weaker than theirs due to which it will depreciate.

The only hypothetical solution is billions of dollars of donations from expats abroad. Considering the latest figures in dam fund, I don't think that will be achievable any time soon.

We need to increase exports in order to hedge our FC exposure.

Reactions: Like Like:
1


----------



## VCheng

Zulfiqar said:


> Subsidies have to be removed, tariff needs to be increased, coal power plants and other cheaper sources of electricity have to be included more in the energy mix. Line losses also need to be reduced.



Let us see if the present government is able to take any or all of these steps in a meaningful way.


----------



## Ahmet Pasha

Sood ki la'anat.


----------



## ajpirzada

VCheng said:


> That may well be true, but there comes a time when blaming the previous government for an inherited mess stops working as an excuse. Results matter in the here and now.



yes but that time is surely not 8 months... especially when the previous govt leaves the economy at the verge of collapse: the economy first collapses before recovering


----------



## VCheng

ajpirzada said:


> yes but that time is surely not 8 months... especially when the previous govt leaves the economy at the verge of collapse: the economy first collapses before recovering



Very true. I have been advocating giving PMIK the remainder of his term to deliver results according to what he promised during his campaign. He has time still.

Reactions: Like Like:
1


----------



## Zulfiqar

A related article w.r.t circular debt.



_An interview with Dr Fiaz Chaudhry, Director Energy Institute LUMS_
_‘_
_Dr. Fiaz Chaudhry is the former Managing Director of the National Transmission and Despatch Company (NTDC) and the current Director of the Energy Institute at the Lahore University of Management Sciences (LUMS). He has over 35 years of power sector experience in more than 10 countries and has led the global power system business of Hatch, a Canadian consulting firm for 15 years. He has a PhD in Electrical Engineering from Purdue University in America. Dr. Fiaz has seen it all when it comes to the power sector in Pakistan. In this candid interview, he gives his views about the challenges being faced by the power sector, the history of how we got into this crisis in the first place and the way forward._

_Below are edited excerpts from the interview._

*BR Research: As far as one can recall, Pakistan’s power sector has been riddled with problems. There was a time when we had surplus electricity and then the past decade saw a crippling power shortage. Please explain to us how this came about.*







*Dr. Fiaz Chaudhry:* The deterioration started in the nineties. For any utility there are three basic functions namely generation, transmission and distribution. Before 1994, all generation plans were the responsibility of WAPDA, and it used to assess the demand to plan generation accordingly so that a balance was maintained.

Around that time, there was increasing interest in unbundling the generation component in many countries around the world including the US. Unfortunately, the Benazir government at the time also made a decision to separate generation from WAPDA and open it to the private sector. But we were not ready for that.

The Power Policy 1994 was introduced, which I call a procurement policy rather than a planning policy. Investors were getting lucrative returns and there was presence of vested interests that led to the planning process being bulldozed and unnecessary megawatts being added to the system. This led to over-pricing, and because all risks were borne by the government meant everyone wanted to put up a power plant. The result was an additional 2300MW of installed capacity more than what was required at the time in 1994.

While the world used competitive bidding to set tariffs, we introduced upfront tariffs, which were loaded with incentives. The decision making process was compromised by appointing junior officers lacking integrity who ceded to pressure by these vested groups. The generation is there now but it was neither bought nor sold. How can the money be recovered and where will the capacity payments be paid for? This is what has been happening throughout the history of Pakistan.

Then during the Musharraf era from 1999 to 2005, there was hue and cry over the surplus power which had been installed in the previous governments. This led to the accumulation of circular debt for the first time as capacity payments for many power plants had to be paid. The contracts were take or pay in nature so capacity payments were guaranteed even if there was no off-take by the government. We tried to export to India but they were producing at a much cheaper rate and refused to buy from us. The government at the time hurt the investment environment by discouraging new investment and a lot of effort was directed towards recovery. The same mistake is being repeated by this government.

Back in 1999, WAPDA wrote a letter to the government that warned that load-shedding will start in 2005-6 and highlighted the need to set up more generation. However, as there was plenty of surplus power in 1999 the government did not heed the advice. The result was a deficit from 2005 to 2013 and constant load-shedding took place.

*BRR: Lets’ talk about circular debt in more detail. Recent estimates put the figure at Rs1.5 trillion. When the PML-N government came into power they cleared more than Rs400 billion circular debts but it is now more than triple that amount in less than six years. Why does it keep ballooning?*

*DFZ:* The circular debt came into the equation when the planning process was disregarded and power plants were set up without following any processes and proper demand forecast. A major reason has been non-compliance of the NTDC’s Grid Code 2005, which gives detailed instructions on every aspect of the power system and can be considered as the bible for the power sector.

There has been an absence of a power generation plan by NTDC and no monitoring from the side of the regulator. In such a situation everyone becomes a generation planner and lobbies rule. This leads to sub-optimal generation resources and the induction of wrong technology with high capex costs.

This drives the tariffs up as there is no reference or least-cost option available from the NTDC plan. The end result is creation of potential capacity trap with huge volume of capacity payments. There is also the risk of early retirement of value generation assets due to underutilization. In addition, as transmission is largely ignored, this leads to higher losses that again lead higher transmission tariffs. All of the above is a vicious cycle and leads to circular debt.

*BRR: What is the solution to these problems then?*

*DFZ:* The power sector needs to be structured correctly first and foremost. There needs to be a merger of some power sector entities to create a new organisation called “Independent System Operator” to avoid duplication of efforts and conflicts. On the other hand, the NTDC needs to be tasked with the planning task and develop an Integrated Energy Plan (IEP) for at least 20 years.

The Private Power Infrastructure Board (PPIB) along with the Alternative Energy Development Board and the provinces need to procure generation capacity and energy needs only according to the developed IEP plan. The NTDC’s role should be that of the market operator and to promote an efficient and openly competitive market for electricity.

The NTDC’s grid code needs to be followed while simulation studies need to be conducted to assess the need for the type of generation projects, their utilization and fuel usage. This will avoid idle capacity and must run energy payments. The existing power purchase agreements (PPAs) need to be renegotiated with the Independent Power Producers (IPPs).

*BRR: You have run the numbers on the financial impact of the power sector from 2019-2025 in collaboration with LUMS. Please share some insights from your analysis.*

*DFZ:* Let’s talk about the capex requirement first, which is about $65 billion from 2015-2024 out of which $50 billion is required in generation and $15 billion in the transmission and distribution network. This is a serious undertaking and amounts to doing the work that we have done in the past seventy years in the next five years.

The total power sector payments including generation, distribution and transmission components would amount to roughly Rs5 trillion in 2025, which is around Rs2.5 trillion for this year. To put this in perspective, our defence budget and foreign debt servicing combined for this year equals close to Rs4 trillion.

In the normal demand scenario that we modelled, the capacity payments will increase from Rs773 billion to Rs1,610 billion (over 200 percent increase), while the capacity payment ratio in the basket price changes from 50 percent to 70 percent by 2025.

The energy payments for “must run” plants will increase from Rs322 billion to Rs523 billion (over 162 percent increase) and this will cause the competitive market available to shrink drastically. The energy payments for power plants under competitive bidding will decrease from Rs427 billion to Rs204 billion essentially becoming less than half.

*BRR: The baseload is only 8000MW meaning that this is the amount we use more or less throughout the year except for peak demand in summers. However, installed capacity is now close to 35000MW. What should be done to utilize the excess power?*

*DFZ:* The need is to increase the base load from 25-40 percent of peak demand in the next three to five years by encouraging and facilitating local manufacturing. This is inevitable for sustainability of the power sector.
The special economic zones (SEZs) should be established where existing transmission lines are available and connections can be given immediately. International manufacturers must be encouraged to establish manufacturing facilities in Pakistan. This will allow us to sell the excess electricity that we are producing.

There is also a need to encourage electric vehicles (EVs), which is a great flexible load for the grid. Moreover, indigenous research and development in the energy sector needs to take place by engaging universities.

*BRR: Despite a ban on imported fuel power plants, a fourth R-LNG power plant of 1263MW has been approved for Punjab. What is your view on this?*

*DFZ:* I opposed this decision when I was head of NTDC, and it is against the recommendations of the Demand-Supply Analysis 2018-2025 report. According to the financial impact analysis this will result in Rs85 annual financial commitment for 15 years as part of the fuel supply agreement alone. If this power plant would not have been procured, it would result in savings of Rs5.5 billion in 2020 all the way to Rs41 billion in 2025.

*BRR: What are your thoughts about the regulation in the power sector?*

*DFZ*: There is an inherent design flaw in Nepra. Members are nominated from provinces on quota basis but what regulatory experience or technical skillset do they possess? This leads to these members relying on the technical input of junior staff, which results in poor regulation. It also means it is easier for the regulator to succumb to pressure from lobby groups.

The NTDC grid code was never followed and it was Nepra’s responsibility to have the grid code implemented. If it had been followed in letter and spirit, the power sector would not have been in this mess. When has NEPRA ever written to NTDC that it is supposed to submit a power generation plan to the regulator in the past 15 years? This happened because there is compromised leadership in both institutions. The result was a demand supply gap that led to interventions by bureaucrats and political government. Unfortunately, Nepra became a licensing authority rather than a regulator.

*BRR: There have been proposals of decentralising the power sector to provincial level following the 18th Amendment. Do you think it is feasible to do this?*

*DFZ:* No. It will only exacerbate the mess in the power sector. The federal government was unable to handle the planning process and coordination amongst the 14 departments, which came about as a result of unbundling of WAPDA. Imagine the coordination and effort required to manage 14 departments in each province that will add up to a total of 64 departments. How do you expect the provinces with their current institutional capacity to undertake such a mammoth task?

*BRR: Please tell us about the initiatives at the LUMS Energy Institute.*

*DFZ:* We have undertaken a comprehensive study of electricity demand and supply scenarios with a focus on capacity and financial impact from 2019-25. We have also come up with electric vehicle policy recommendations, which utilize excess electricity, improve the environment and reduce the fuel import bill. There has also been an assessment of competitive electricity markets.


https://www.brecorder.com/2019/06/2...payments-to-be-north-of-rs5-trillion-in-2025/


----------



## Sugarcane

Zulfiqar said:


> A related article w.r.t circular debt.
> 
> 
> 
> _An interview with Dr Fiaz Chaudhry, Director Energy Institute LUMS
> ‘
> Dr. Fiaz Chaudhry is the former Managing Director of the National Transmission and Despatch Company (NTDC) and the current Director of the Energy Institute at the Lahore University of Management Sciences (LUMS). He has over 35 years of power sector experience in more than 10 countries and has led the global power system business of Hatch, a Canadian consulting firm for 15 years. He has a PhD in Electrical Engineering from Purdue University in America. Dr. Fiaz has seen it all when it comes to the power sector in Pakistan. In this candid interview, he gives his views about the challenges being faced by the power sector, the history of how we got into this crisis in the first place and the way forward._
> 
> _Below are edited excerpts from the interview._
> 
> *BR Research: As far as one can recall, Pakistan’s power sector has been riddled with problems. There was a time when we had surplus electricity and then the past decade saw a crippling power shortage. Please explain to us how this came about.*
> 
> 
> 
> 
> 
> 
> *Dr. Fiaz Chaudhry:* The deterioration started in the nineties. For any utility there are three basic functions namely generation, transmission and distribution. Before 1994, all generation plans were the responsibility of WAPDA, and it used to assess the demand to plan generation accordingly so that a balance was maintained.
> 
> Around that time, there was increasing interest in unbundling the generation component in many countries around the world including the US. Unfortunately, the Benazir government at the time also made a decision to separate generation from WAPDA and open it to the private sector. But we were not ready for that.
> 
> The Power Policy 1994 was introduced, which I call a procurement policy rather than a planning policy. Investors were getting lucrative returns and there was presence of vested interests that led to the planning process being bulldozed and unnecessary megawatts being added to the system. This led to over-pricing, and because all risks were borne by the government meant everyone wanted to put up a power plant. The result was an additional 2300MW of installed capacity more than what was required at the time in 1994.
> 
> While the world used competitive bidding to set tariffs, we introduced upfront tariffs, which were loaded with incentives. The decision making process was compromised by appointing junior officers lacking integrity who ceded to pressure by these vested groups. The generation is there now but it was neither bought nor sold. How can the money be recovered and where will the capacity payments be paid for? This is what has been happening throughout the history of Pakistan.
> 
> Then during the Musharraf era from 1999 to 2005, there was hue and cry over the surplus power which had been installed in the previous governments. This led to the accumulation of circular debt for the first time as capacity payments for many power plants had to be paid. The contracts were take or pay in nature so capacity payments were guaranteed even if there was no off-take by the government. We tried to export to India but they were producing at a much cheaper rate and refused to buy from us. The government at the time hurt the investment environment by discouraging new investment and a lot of effort was directed towards recovery. The same mistake is being repeated by this government.
> 
> Back in 1999, WAPDA wrote a letter to the government that warned that load-shedding will start in 2005-6 and highlighted the need to set up more generation. However, as there was plenty of surplus power in 1999 the government did not heed the advice. The result was a deficit from 2005 to 2013 and constant load-shedding took place.
> 
> *BRR: Lets’ talk about circular debt in more detail. Recent estimates put the figure at Rs1.5 trillion. When the PML-N government came into power they cleared more than Rs400 billion circular debts but it is now more than triple that amount in less than six years. Why does it keep ballooning?*
> 
> *DFZ:* The circular debt came into the equation when the planning process was disregarded and power plants were set up without following any processes and proper demand forecast. A major reason has been non-compliance of the NTDC’s Grid Code 2005, which gives detailed instructions on every aspect of the power system and can be considered as the bible for the power sector.
> 
> There has been an absence of a power generation plan by NTDC and no monitoring from the side of the regulator. In such a situation everyone becomes a generation planner and lobbies rule. This leads to sub-optimal generation resources and the induction of wrong technology with high capex costs.
> 
> This drives the tariffs up as there is no reference or least-cost option available from the NTDC plan. The end result is creation of potential capacity trap with huge volume of capacity payments. There is also the risk of early retirement of value generation assets due to underutilization. In addition, as transmission is largely ignored, this leads to higher losses that again lead higher transmission tariffs. All of the above is a vicious cycle and leads to circular debt.
> 
> *BRR: What is the solution to these problems then?*
> 
> *DFZ:* The power sector needs to be structured correctly first and foremost. There needs to be a merger of some power sector entities to create a new organisation called “Independent System Operator” to avoid duplication of efforts and conflicts. On the other hand, the NTDC needs to be tasked with the planning task and develop an Integrated Energy Plan (IEP) for at least 20 years.
> 
> The Private Power Infrastructure Board (PPIB) along with the Alternative Energy Development Board and the provinces need to procure generation capacity and energy needs only according to the developed IEP plan. The NTDC’s role should be that of the market operator and to promote an efficient and openly competitive market for electricity.
> 
> The NTDC’s grid code needs to be followed while simulation studies need to be conducted to assess the need for the type of generation projects, their utilization and fuel usage. This will avoid idle capacity and must run energy payments. The existing power purchase agreements (PPAs) need to be renegotiated with the Independent Power Producers (IPPs).
> 
> *BRR: You have run the numbers on the financial impact of the power sector from 2019-2025 in collaboration with LUMS. Please share some insights from your analysis.*
> 
> *DFZ:* Let’s talk about the capex requirement first, which is about $65 billion from 2015-2024 out of which $50 billion is required in generation and $15 billion in the transmission and distribution network. This is a serious undertaking and amounts to doing the work that we have done in the past seventy years in the next five years.
> 
> The total power sector payments including generation, distribution and transmission components would amount to roughly Rs5 trillion in 2025, which is around Rs2.5 trillion for this year. To put this in perspective, our defence budget and foreign debt servicing combined for this year equals close to Rs4 trillion.
> 
> In the normal demand scenario that we modelled, the capacity payments will increase from Rs773 billion to Rs1,610 billion (over 200 percent increase), while the capacity payment ratio in the basket price changes from 50 percent to 70 percent by 2025.
> 
> The energy payments for “must run” plants will increase from Rs322 billion to Rs523 billion (over 162 percent increase) and this will cause the competitive market available to shrink drastically. The energy payments for power plants under competitive bidding will decrease from Rs427 billion to Rs204 billion essentially becoming less than half.
> 
> *BRR: The baseload is only 8000MW meaning that this is the amount we use more or less throughout the year except for peak demand in summers. However, installed capacity is now close to 35000MW. What should be done to utilize the excess power?*
> 
> *DFZ:* The need is to increase the base load from 25-40 percent of peak demand in the next three to five years by encouraging and facilitating local manufacturing. This is inevitable for sustainability of the power sector.
> The special economic zones (SEZs) should be established where existing transmission lines are available and connections can be given immediately. International manufacturers must be encouraged to establish manufacturing facilities in Pakistan. This will allow us to sell the excess electricity that we are producing.
> 
> There is also a need to encourage electric vehicles (EVs), which is a great flexible load for the grid. Moreover, indigenous research and development in the energy sector needs to take place by engaging universities.
> 
> *BRR: Despite a ban on imported fuel power plants, a fourth R-LNG power plant of 1263MW has been approved for Punjab. What is your view on this?*
> 
> *DFZ:* I opposed this decision when I was head of NTDC, and it is against the recommendations of the Demand-Supply Analysis 2018-2025 report. According to the financial impact analysis this will result in Rs85 annual financial commitment for 15 years as part of the fuel supply agreement alone. If this power plant would not have been procured, it would result in savings of Rs5.5 billion in 2020 all the way to Rs41 billion in 2025.
> 
> *BRR: What are your thoughts about the regulation in the power sector?*
> 
> *DFZ*: There is an inherent design flaw in Nepra. Members are nominated from provinces on quota basis but what regulatory experience or technical skillset do they possess? This leads to these members relying on the technical input of junior staff, which results in poor regulation. It also means it is easier for the regulator to succumb to pressure from lobby groups.
> 
> The NTDC grid code was never followed and it was Nepra’s responsibility to have the grid code implemented. If it had been followed in letter and spirit, the power sector would not have been in this mess. When has NEPRA ever written to NTDC that it is supposed to submit a power generation plan to the regulator in the past 15 years? This happened because there is compromised leadership in both institutions. The result was a demand supply gap that led to interventions by bureaucrats and political government. Unfortunately, Nepra became a licensing authority rather than a regulator.
> 
> *BRR: There have been proposals of decentralising the power sector to provincial level following the 18th Amendment. Do you think it is feasible to do this?*
> 
> *DFZ:* No. It will only exacerbate the mess in the power sector. The federal government was unable to handle the planning process and coordination amongst the 14 departments, which came about as a result of unbundling of WAPDA. Imagine the coordination and effort required to manage 14 departments in each province that will add up to a total of 64 departments. How do you expect the provinces with their current institutional capacity to undertake such a mammoth task?
> 
> *BRR: Please tell us about the initiatives at the LUMS Energy Institute.*
> 
> *DFZ:* We have undertaken a comprehensive study of electricity demand and supply scenarios with a focus on capacity and financial impact from 2019-25. We have also come up with electric vehicle policy recommendations, which utilize excess electricity, improve the environment and reduce the fuel import bill. There has also been an assessment of competitive electricity markets.
> 
> 
> https://www.brecorder.com/2019/06/2...payments-to-be-north-of-rs5-trillion-in-2025/



So, other than reducing the pollution, EVs can also help us in addressing our circular-debt problem of energy sector. If it's true than what we are waiting for?


----------



## Zulfiqar

Sugarcane said:


> So, other than reducing the pollution, EVs can also help us in addressing our circular-debt problem of energy sector. If it's true than what we are waiting for?





We have 3M plus vehicles running around (excluding bikes).

If we are to replace even 500 K of them in five years at 35,000$ (PKR 5.49 M- I am being optimistic here) via direct imports (no local production) we are looking at an FX outflow of 17.5 Billion USD. The govt would have to offer a subsidy of USD 17,500 per vehicle to bring the final cost to around 2.74 M PKR so that middle class customers can buy these types of vehicles instead of corolla/city e.t.c.

This means additional debt of 8.75 B USD for the govt. over 5 years apart from current circular debt (funded plus payables of 10 B USD)

This subsidy would have to be borne regardless of import or local production considering high EV per unit cost.

Full 3 M substitution requires 105 B $ plus expenditure at present levels.

The above does not include cost for spare parts and supercharger network.

EVs will not reduce the overall import bill unless we find substitute for following in local market. By import bill I mean the usage of FX for paying for the following:


Capex for setting up plant.
Capex for battery plant.
FX for payment of dividends/interest and loan installments to foreign investors
FX for opex e.t.c


However, it will reduce the overall petroleum based import bill down the line (a portion of overall import bill). That will be offsetted by increased LNG import (unless we divert some of the imported fuel stock for generating electricity for EV only).

If somehow we can arrange FX for all the above (either for direct imports or for local production) and somehow build a supercharger network then we will be able to use that reduce our circular debt by adding a surcharge in final tariff to recover the 8.75 B $ subsidy and the 10 B $ plus circular debt.





I have yet to read the below study but from initial go through it looks like a good one.

http://web.lums.edu.pk/~eig/pdf/evReport.pdf


----------



## Pakistansdefender

Half the people here didn't read the article and start commenting . 
Atleast they are trying to reform. 
We have become such a sick nation and have fallen in love with our ills and pains that whenever anyone starts to do reforms our first expressions is 'you cannot reform things in Pakistan' . 
Electricity circular debt is not a thing achieved in an year or two. They are moving forward towarda electric metering plus going after the theifs too . What people forget is that they have to work with the same people and infrastructure that exist . They cannot built a new infrastructure to collect electricity bills etc.
Only last year of previous government is enough to destroy our economy by making such huge skyrocketing losses . 
Stop being a pessimist nation .


----------



## VCheng

Pakistansdefender said:


> We have become such a sick nation and have fallen in love with our ills and pains that whenever anyone starts to do reforms our first expressions is 'you cannot reform things in Pakistan' .



This is not a sickness. This is a design feature that provides the results we seek.

Reactions: Like Like:
1


----------



## Sugarcane

Zulfiqar said:


> We have 3M plus vehicles running around (excluding bikes).
> 
> If we are to replace even 500 K of them in five years at 35,000$ (PKR 5.49 M- I am being optimistic here) via direct imports (no local production) we are looking at an FX outflow of 17.5 Billion USD. The govt would have to offer a subsidy of USD 17,500 per vehicle to bring the final cost to around 2.74 M PKR so that middle class customers can buy these types of vehicles instead of corolla/city e.t.c.
> 
> This means additional debt of 8.75 B USD for the govt. over 5 years apart from current circular debt (funded plus payables of 10 B USD)
> 
> This subsidy would have to be borne regardless of import or local production considering high EV per unit cost.
> 
> Full 3 M substitution requires 105 B $ plus expenditure at present levels.
> 
> The above does not include cost for spare parts and supercharger network.
> 
> EVs will not reduce the overall import bill unless we find substitute for following in local market. By import bill I mean the usage of FX for paying for the following:
> 
> 
> Capex for setting up plant.
> Capex for battery plant.
> FX for payment of dividends/interest and loan installments to foreign investors
> FX for opex e.t.c
> 
> 
> However, it will reduce the overall petroleum based import bill down the line (a portion of overall import bill). That will be offsetted by increased LNG import (unless we divert some of the imported fuel stock for generating electricity for EV only).
> 
> If somehow we can arrange FX for all the above (either for direct imports or for local production) and somehow build a supercharger network then we will be able to use that reduce our circular debt by adding a surcharge in final tariff to recover the 8.75 B $ subsidy and the 10 B $ plus circular debt.
> 
> 
> 
> 
> 
> I have yet to read the below study but from initial go through it looks like a good one.
> 
> http://web.lums.edu.pk/~eig/pdf/evReport.pdf



When there is will, there are ways as well.

I am not aware of the costs of electric cars, If it's about $35,000 as you said then they are already out of range for middle and upper middle class who buy local vehicle (only local parts of these vehicles are tin box in which they install engine, maybe the seats, side mirrors and wipers etc. So, it's not there's not out flow of ForEx for these so called local vehicles). Vehicle costing $35K and above are already imported ones mostly, so we aren't talking about any new out-flow of forex as it's already happening.

We can start with electric buses (which again we are already importing), start with CKDs with clear targets of localization. Charging stations network will gradually develop when there will be demand just like CNG stations network developed and now LPG network is mushrooming.

Edit: Along with electric buses, we can start replacing most polluting and noisy auto rickshaws with electric ones. I am sure it can be built in $1000 price which will be almost same as current ones.


----------



## Zulfiqar

Sugarcane said:


> When there is will, there are ways as well.
> 
> I am not aware of the costs of electric cars, If it's about $35,000 as you said then they are already out of range for middle and upper middle class who buy local vehicle (only local parts of these vehicles are tin box in which they install engine, maybe the seats, side mirrors and wipers etc. So, it's not there's not out flow of ForEx for these so called local vehicles). Vehicle costing $35K and above are already imported ones mostly, so we aren't talking about any new out-flow of forex as it's already happening.
> 
> We can start with electric buses (which again we are already importing), start with CKDs with clear targets of localization. Charging stations network will gradually develop when there will be demand just like CNG stations network developed and now LPG network is mushrooming.
> 
> Edit: Along with electric buses, we can start replacing most polluting and noisy auto rickshaws with electric ones. I am sure it can be built in $1000 price which will be almost same as current ones.




It costs $ 30-35K plus for a decent four seater that is not a dinky.













https://www.bloomberg.com/news/feat...-being-built-by-billionaire-s-energy-absolute



For that amount you can buy two local 1.6L corollas or two used 2015 imported toyota aqua hybrids.

Without a subsidy/rebate there won't be enough of a market because it will be out of reach of most users. It will cost as much as a Toyota Hilux Revo.

Regardless of how much of the EV will be produced here, we are looking at additional debt of 8.75 B $ to cover the subsidies (if govt go aheads with it)

How and why the govt. will spend that much in subsidies to cater to 500,000 families when it would be wiser to use the same amount for some other projects in order to benefit millions more.

We have 17.465 M registered bikes in Pakistan. Instead of replacing 500,000 1.3/1.6 L engine capacity cars (if the target market is middle income families) we can easily replace nearly around 9 million bikes.

This will yield more fuel saving relative to EVs as bikes use the most fuel in percentage terms. 

I think that Pakistan should work on a battery plant and work on electric buses and bikes first instead of EVs.

Look at china as to how are they handling the transport problem. We need to learn lessons from them.

Charging stations can be built on the defunct CNG stations around the cities with public-private partnership.









Speakings of Electric bikes/scooters. Some years ago a factory in hattar was assembling below scooters. It ran out of juice and the guy testing it got it charging from a shop.

http://nationalgroup.pk/main-evehicle.html


----------



## Sugarcane

Zulfiqar said:


> It costs $ 30-35K plus for a decent four seater that is not a dinky.
> 
> 
> 
> 
> 
> 
> View attachment 566852
> 
> 
> 
> 
> https://www.bloomberg.com/news/feat...-being-built-by-billionaire-s-energy-absolute
> 
> 
> 
> For that amount you can buy two local 1.6L corollas or two used 2015 imported toyota aqua hybrids.
> 
> Without a subsidy/rebate there won't be enough of a market because it will be out of reach of most users. It will cost as much as a Toyota Hilux Revo.
> 
> Regardless of how much of the EV will be produced here, we are looking at additional debt of 8.75 B $ to cover the subsidies (if govt go aheads with it)
> 
> How and why the govt. will spend that much in subsidies to cater to 500,000 families when it would be wiser to use the same amount for some other projects in order to benefit millions more.
> 
> We have 17.465 M registered bikes in Pakistan. Instead of replacing 500,000 1.3/1.6 L engine capacity cars (if the target market is middle income families) we can easily replace nearly around 9 million bikes.
> 
> This will yield more fuel saving relative to EVs as bikes use the most fuel in percentage terms.
> 
> I think that Pakistan should work on a battery plant and work on electric buses and bikes first instead of EVs.
> 
> Look at china as to how are they handling the transport problem. We need to learn lessons from them.
> 
> Charging stations can be built on the defunct CNG stations around the cities with public-private partnership.
> 
> 
> 
> View attachment 566853
> 
> 
> 
> Speakings of Electric bikes/scooters. Some years ago a factory in hattar was assembling below scooters. It ran out of juice and the guy testing it got it charging from a shop.
> 
> http://nationalgroup.pk/main-evehicle.html
> 
> View attachment 566856
> View attachment 566857



Did you even cared to read the post you quoted? I am talking about starting with Buses and Auto-Rickshaws (Bikes can be added as you suggested) - We are already importing Buses and engines/other parts of Auto-Rickshaws & Bikes. There's no need to give subsidy, just double the import duty on these things to make them expensive than electric Buses, Autos & Bikes. Once charging network is established because of them then target replacing smaller cars with EVs.


----------



## Zulfiqar

Sugarcane said:


> Did you even cared to read the post you quoted? I am talking about starting with Buses and Auto-Rickshaws (Bikes can be added as you suggested) - We are already importing Buses and engines/other parts of Auto-Rickshaws & Bikes. There's no need to give subsidy, just double the import duty on these things to make them expensive than electric Buses, Autos & Bikes. Once charging network is established because of them then target replacing smaller cars with EVs.




Yes I did and that is why I seconded your idea about buses along with my suggestion of bikes instead of EVs as bikes are one of the biggest users of fuel. 

I only discussed subsidy and their drawbacks about EV/Electric cars only (not other vehicles).


----------



## Sugarcane

Zulfiqar said:


> Yes I did and that is why I seconded your idea about buses along with my suggestion of bikes instead of EVs as bikes are one of the biggest users of fuel.
> 
> I only discussed subsidy and their drawbacks about EV/Electric cars only (not other vehicles).



Okay, But I am not in favor of giving any subsidy, we can make people to adopt EVs by increasing the duties on Imported/Knockdown Kits/Parts of conventional vehicles in use, make them much more expensive than EVs, start with Busses, Auto-Rickshaws and Motor bikes. Passenger cars should be left for next phase. But the biggest hurdle I see is government's revenues, As people in Pakistan don't have habit of paying direct taxes, so indirect taxes is the major source of revenue for state and fuel is cash cow where state gets instant revenue. So, unless tax reforms in parallel are done to minimize reliance on indirect taxes, I don't think state itself will be interested in EVs.


----------



## Zulfiqar

Sugarcane said:


> Okay, But I am not in favor of giving any subsidy, we can make people to adopt EVs by increasing the duties on Imported/Knockdown Kits/Parts of conventional vehicles in use, make them much more expensive than EVs, start with Busses, Auto-Rickshaws and Motor bikes. Passenger cars should be left for next phase. But the biggest hurdle I see is government's revenues, As people in Pakistan don't have habit of paying direct taxes, so indirect taxes is the major source of revenue for state and fuel is cash cow where state gets instant revenue. So, unless tax reforms in parallel are done to minimize reliance on indirect taxes, I don't think state itself will be interested in EVs.




Yes, our taxation needs to be fixed as well. 

We should also work on a gigafactory type project as it would yield enormous ROI to Pakistan going forward.


----------



## hassanraza90

Some times I wonder, can Pakistan be ever debt free during my life time and why there on end of loans that Pakistan has to take.


----------



## Kabotar

https://www.brecorder.com/2019/09/02/521089/521089/



* An interview with Nadeem Babar – PM’s Special Assistant on Petroleum: ‘Most refineries should be shut down because they are too old and inefficient’ *


BR Research September 2, 2019
Nadeem Babar is a senior executive with extensive global experience in power generation, infrastructure finance and corporate finance. During his career, he has developed, financed and/or managed over 150 power plants of all commercially available technologies, as well as other energy sector assets. He has also been involved in social sector development, especially education.

Mr. Babar has an extensive international investment banking and project finance experience. He is the founder and was the CEO of Orient Power Company (Pvt) Limited until August 2018. He has served on numerous boards in the past. Currently, he serves as the Chairperson of Task Force on Energy Reforms. He is also a board member of Port Qasim Authority, Sarmaya-e-Pakistan and an independent director on the board of Samba Bank. He is the chairman of the board of Progressive Education Network, a section 42 company that runs 226 adopted government schools, with over 48,000 students.





Mr. Babar holds a M.S. in Civil Engineering Management from Stanford University, a B.A. in Economics from Columbia University and a B.S. in Civil Engineering from Columbia University. He was a member of Phi Beta Kappa (Liberal Arts) and Chi Upsilon (Civil Engineering) honor societies for academic excellence.

Last time BR Research met him in his capacity as the Chairperson Energy Reforms Taskforce, he talked at length about his plans to address the structural issues in the power sector and addressing the circular debt. BR Research sat down with Mr. Babar again recently in his capacity as PM’s Special Assistant on Petroleum where he discusses the issues faced by the petroleum sector, particularly the gas sector reforms that the government has embarked upon. The edited transcripts of the conversation are produced below:

……………………………………………………………………………………..

BR Research: Can you share the progress in the power sector for targets you shared the last time we met?

Nadeem Babar: I mentioned four actions in the power sector the last time we met. One was to bring the power tariff close to the cost after inclusion of funded subsidies. In the latest two quarters of 2019 so far, we have seen some currency movements, the impact of which will come in the future; otherwise the tariff includes and trues up everything including the capacity payments and the indexations till the beginning of this year.

The second thing I talked about was the elimination of unfunded subsidies. The total quantum of subsidies from the Tariff Differential Subsidy (TDS) model, which is roughly Rs240 billion, has been included in the budget. As per the new mechanism decided with the government, this amount has been given at the disposal of the Ministry of Power that has just appointed an audit firm, where they will submit the subsidy claim to the audit firm now. This will streamline the process of disbursement of TDS

The third aspect we discussed was transmission. We have completed about 90-95 percent of the major issues we had identified last year. We are now onto the next round of identifying places to remove any further transmission constraints. The highest power that moved through the system in June last year was 19,600MW; whereas on July 4, 2019, we hit the highest power generation of 23,050MW, which means we moved an additional 3,500MW through the system in this one year without any problem.

The fourth issue was that of losses and theft. We launched the theft control program in November last year. We collected additional Rs121 billion revenue from this program in FY19. Taking out tariff impact and additional sale of units, the net improvement has been of around Rs104 billion.

We had estimated that by year ending June 2019, the accumulation of circular debt should be Rs320 billion accumulated for that year. We are pretty much on the spot of what we had targeted. As per the provisional numbers we are at Rs350-360 billion with one caveat: the TDS for May 2019 and June 2019 has not been disbursed. Including that, we will be close to our target. In July 2019 – the first month of FY20 with the revised tariff – the gap prior to TDS disbursement is only Rs20 billion and after TDS this will come down to single digits compared to Rs38 billion per month last summer.

We have targeted less that Rs100 billion circular debt accumulation for FY20 with the monthly average of Rs8 billion after accounting for TDS disbursement. If we continue at the same pace with no new enhancements, we will be on target. For first 6 months of FY21 when some of our technology interventions would have been initiated, we will be able to bring this monthly figure of Rs8 billion to practically zero. To get to these targets, nothing new is needed. Everything that we planned is in process; – initiated or well under way. We just have to take them to conclusion.

One last thing I would like to mention is that we initiated a campaign on theft control for gas, or what is known as UFG in the gas sector, in March 2019; and we have reduced UFG by one percent in these last four months in both Sui companies. This one percent achievement is a little deceptive as in few areas we did not seen any progress. Excluding those, the improvement in UFG has been over 1.5 percent. One of these problem areas is in KP where no gas is provided to regions that produce gas and has resulted in high losses. In the SSGC network, our key concern area is Balochistan where we need to make progress on cutting gas losses.

BRR: How do you explain the idle capacity that will further go up with new capacities coming online?

NB: Though idle capacity is there, there are some misconceptions. In peak summer months, the idle capacity is zero for a month. At the same time, there is about 2000MW of capacity that needs to be shut down due to very low efficiency but is still being run in the summer. If this is done, the one-month worth of full capacity utilisation can be extended to three or four months. But since our peak comes in summer, there will be times in spring and summer where there will be unutilised capacity since we have to plan for peak summer demand.

Second, people don’t realise the natural steady decrease in capacity utilisation from summer to winter is always there when hydel is added to the equation.

And third, the availability of solar and wind is between 20-30 percent. We can’t change that so there is idle capacities depending of the variability in wind or sun since these currently are not base load supply. On paper our installed capacity is 32,000MW; but the actual effective available capacity varies with seasons due to reasons I’ve just mentioned. It peaks in summers to about 23,000 to 24,000MW, and comes down in winters with hydel dropping down to practically nil.

BRR: Tell us about the broader gas sector reforms you have embarked upon?

NB: Within the petroleum sector we have five sub sectors: E&P, Refining and marketing (R&M), Pipelines and Gas Sales, LNG, and LPG. Within the next few months, significant reforms and policy changes are planned in all these sectors. You will see a whole list of policy and regulation changes going to the cabinet or the CCI in these five segments.

We had not awarded any block in the last 5.5 years prior to this government taking office, which has resulted in dwindling gas production. Every year, we are losing about seven percent of our production. This cycle is not instant; increasing exploration and production activity today will yield results in about 3-4 years. Even the existing players have been focusing more on development wells than exploratory wells to find new gas. To address why there has been a decline in drilling interest, we started consultations with all the industry. And surprisingly, pricing of gas was not the issue; we found out that it was the risk associated with policy changes in recent years that made oil & gas exploration unfeasible for many companies. One such example is the abrogation of signed contracts by introducing a new policy that took away some concessions and forcibly converted prior contracts to new terms.

Another example is that of wind fall levy on oil. The government decided to put a windfall levy on oil when the oil price touched $140. This essentially nullified the conditions and agreement signed in the existing contracts in terms of price being paid to the producer. Effectively, when the oil hit the peak of $140 a barrel, the price paid for local oil produced peaked out at just over $60.

Then in the E&P sector, the policymaker – Director General Petroleum Concession (DGPC) – itself is the regulator.

What we are doing is that we are making changes in the policy and separating regulatory function from the policymaking. So, there will be separate regulator for the E&P sector. Whether we merge it with OGRA or make a separate upstream regulatory body that is still being debated.

Another major thing we are working on is the old fields that got concessions 20-25 years ago signed at $1.75 to $2.50 that still haven’t exhausted completely. When you put in a new production well to replace the old wells, you are not taking the risk whether there exist any gas reserves, but you are still spending money to drill a new well. There comes an inflection point where the price of gas being offered in these old fields does not justify spending money to put new wells to extract that last volume of gas. There are many fields today that still have some gas reserves but it is not economical to take that gas out at the original prices in these contracts.

Our point of view is very simple. Agreeing to import LNG at say $9 versus not willing to increase the gas prices of these old fields for example from $2 to $3 to extract that last extractable volume out is a nonsensical decision, at a macro level. Do you make changes in the agreement? Because if you don’t, the operator and the partners will abandon the field as it becomes uneconomical. If the government plans to take it over, it can only auction it again at the current prices under the existing policy which is higher.

What we are now coming up with a change in policy for these end-of-life or marginal fields where the gas from these fields is offered a new price to replace imported gas.

BRR: What are your plans for the LNG sector?

NB: Our main issue in the LNG sector is that we have two signed contracts with two terminals where effectively, the entire obligation is that of the government. Our recommendation, which the cabinet has approved, is that the government is not going to make any new financial commitments or buy LNG, except for the two terminals it has contracted with.

We want the private sector to step in. In the last two months, we have given full authority to the private players for setting up an RLNG terminal and finding their market. Secondly, if the existing terminals want to remarket their excess capacity, they are free to do so. And if they do so, and the government is not using its full capacity, then effectively they are first remarketing our unused capacity, which basically means that the take-or-pay charge that we are supposed to pay them should first reduce before they sell off the extra.

Thirdly, while the third-party access rules for the pipelines have been issued, we are now working on third-party access rules for the terminals. Effectively, we are shifting the LNG business from a pure state-led monopoly to an open market where the government will be one player, and there will be other players from the private sector. Pipeline will be open access; the available capacity is advertised and live data is available to let people make decisions as per market conditions.

BRR: What other areas are you trying to reform?

NB: In the gas pipeline segment, we plan to separate the transmission from the distribution and split the distribution into smaller units not necessarily along the provincial lines. Why do we want to separate pipelines? SNGPL operating from northern Sindh to the northern tips of KPK is too large to effectively manage. Also, if we are to allow private gas, which will not be possible without separating transmission part of the pipeline and giving it open access. Our fundamental approach in the deregulation of pipeline is to separate the trunk transmission from both gas distribution companies and combine them into a single transmission company, which will be open access. The distribution should be split in my opinion into six distribution companies and privatised where possible.

We are also finalising the laying down of the third major trunk line, because our existing trunk lines are running on full capacity. We really don’t have much room to add gas to go from south to north whether it’s LNG or domestic gas. We will take this third line to the ECC and then to the cabinet towards the end of September for approval.

BRR: Let’s talk about the downstream refining segment.

NB: Refining and marketing has three segments: refineries, OMCs and retail. I believe that except PARCO refinery, all other refineries should be shut down because they are too old and too inefficient. Because of its location, maybe I give some leeway to Attock Refinery as well.

We are currently working on two new refineries. Work on PARCO Coastal Refinery will start from the beginning of next year. It will be a 250,000-barrel top of the line deep conversion refinery and will take 5 years to complete. Because of the delay in the project, the cost of the project has gone up and PARCO does not have the financial capacity to implement the $6-7 billion refinery itself. Already UAE government has 40 percent shareholding through PARCO and it is ready to increase its position directly or through another UAE-based company.

The second refinery is the Saudi refinery which will take time. We are working on its feasibility, and I can tell you that development work is happening at a good pace.

Another related fact is that we have added a provision in the budget that those refineries that are willing to go into deeper conversion will have income tax exemption and custom duty exemption on such conversion projects as with new refineries. PRL is working to benefit from this provision.

BRR: How are you dealing with the FO crisis?

NB: Our daily FO production in around 8-9k tons, out of which 2k tons is used by general industry. So, we have about 7k tons of FO to deal with, which was previously taken up by the power sector. Byco’s one unit is not operating for some time, while Attock’s production is around 1,100 tons. ATRL gets all the crude from the north region in Pakistan and produces low sulphur furnace oil. What we have done in the previous few months is that we have sent Attock’s entire LSFO production to KAPCO.

Why are we doing it this way? There are two reasons: exporting Attock’s FO is uneconomical given the freight. Attock will be reasonably secure if KAPCO runs on fuel oil only for a month and a half in the year. We expect that in winters when the gas will be diverted to domestic sector and we are not able to provide gas to KAPCO, it will run on fuel oil for a few days in winters. So when I say that we want to end fuel oil being used in power sector, it means that other than a short window in winters when gas is diverted to domestic sector, and 15-30 days of peak summers, fuel oil won’t be used in the power sector.

In this context, the domestic production of 2,700 tons of PARCO and 1,100 tons of Attock will be consumed in the power sector for another 1-2 years. The production of fuel oil by coastal refineries, which is around 4000-5000 tons per day is the issue. Last year when this issue erupted, we made a mechanism for export of furnace oil with consultations with the refineries where we agreed to give them financial support for six months, while they developed export channels. Almost everyone agreed, but then tensions with our neigbours resulted in increase in demand for a different slate of petroleum products for defense purposes, and everything went on the back burner. This year, we will revive the plan and ultimately get the refineries to export excess fuel oil, until they upgrade.

BRR: What are the issues of the OMCs and the retailers?

NB: The issue with the OMCs is that the regulation on the storage of oil was formed in a reactive mode after the crisis of December 2015, and it has some serious structural issues. They are not thought through. Big players that have over 800 fuel stations in the country have not been able to setup new stations due to these storage regulations by OGRA. We need to fix this storage concept; rather than focusing on storage, big players talk of “inventory in country” and inventory turnover to lower cost of storage, which is more sensible to address shortage issues.

Another serious issues that the OMCs, refineries and to some extent retailers face is OGRA’s decision to factor in exchange rate fluctuation in the cost of product. In the last one-year exchange rate has moved so quickly that there is much variability in the amount at which the orders had been placed, versus the amount that was actually paid. There was a lot of agitation, and OGRA changed the regulation to end of monthly exchange rate application. While this addressed the volatility in the exchange rates, it fails to address the second factor that oil imports cannot be hedged as per SBP regulations and payments may come after the end of the month. This has resulted in the accumulation of over Rs20 billion of unrecovered costs relating to exchange movement. On the other hand, the ECC decision was to use the actual cost to make fuel price calculations. These losses due to exchange movements have been detrimental to the refineries’ and OMCs’ profitability.

The issue with the retailers is that the margin that they were given many years ago is completely off balance with today’s inflation and cost. We need to fix this as well.

BRR: Let’s talk about the LPG sector now.

NB: In the LPG sector, we are producing around 2,200-2,300 tons per day domestically on average. During peak winter times, the demand rises to 3,200-3,500 tons per day, while in summers it is around2,700-2,800 tons per day. Previously, the price at which LPG was being sold had no connection to the cost. Domestic selling prices have ranged from PKR 50,000 to 80,000 per ton. Price volatility was rampant and supply in winters became inconsistent.

To address these issues, we are coming up with a new policy in the next 30-60 days. There are four major LPG producing countries in the region: Iran, Oman, UAE, and Qatar. What we are recommending is to make a weighted basket of the indices of these four countries as the benchmark, then using an average of freight to Karachi as a levy, and peg the domestic price to the weighted basket to bring them on a level playing field. This will make supply consistent and price relatively stable.

BRR: DISCOs have been a top priority for privatisation for a longtime. What’s the progress?

NB: While a lot of work is being done in the regard, there is a discussion going on between the various government stakeholders over the timing of the privatisation process. I was asked to make a report on the privatisation of DISCOs about five months ago, which I submitted to the cabinet committee on Privatisation back in April.

I proposed that we split some DISCOs into smaller units. Out of the resulting 16-17 DISCOs, around 11 can easily be privatised, and should be privatised immediately, while around 5-6 DISCOs that aren’t yet ready can be handed over to the provinces, or continue operations in present structure with the condition of a subsidy commitment, until they get ready.

Overall, it is expected that some of the first DISCOs will come up for privatisation within 1-2 years, but how many eventually get privatised is being discussed.


----------



## tkmd

Pakistan has big financial challenges. But iA as the economic shock of this devaluation recedes and as our industries orient themselves to exports, as CPEC continues to develop and as nascent relationships with new trading partners solidify I am hopeful that a growing economy will provide the fiscal space to deal with these issues. Daunting tasks but as a PMLN partisan let me just remind everyone of one thing....im 35 years old and in my lifetime I do not remember a time when Pakistan was this alone diplomatically and this challenged fiancially. And yet this Prime Minister has weathered an attack by India, shot down their jet and now literally knocked that ugly badmanas modi onto his butt at the UN. PTI cleaned India's clock on social media, international media hype and drove the discussion. Benazir never did that. Musharraf never did that. Sharif never did that. Zardari never did that. 

So heres a guy who tilts to PMLN openly saying that PM IK is slowly but surely making us proud and showing us the way. Hell iA make headway with the economy as well.


----------



## Zulfiqar

Just a heads up.

Some of the circular debt parked in PHPL had principal payments coming up.

Currently negotiations are being held with the banks (who own the debt asset) to revolve/reschedule it for another 4-5 years via fresh syndicate facility.


----------



## Sulman Badshah

After the issuance of CPPA new report .. Circular debt will shoot upto 2000 billion Rupees


----------



## Danish saleem

Stability is Every Thing! Warren Buffet.

and sorry to say with Political instability , we cant reach anywhere, and Mr. PM dont even have ability to take people in confidence .

Political situation getting worst day by day!


----------



## Kabotar

Danish saleem said:


> Stability is Every Thing! Warren Buffet.
> 
> and sorry to say with Political instability , we cant reach anywhere, and Mr. PM dont even have ability to take people in confidence .
> 
> Political situation getting worst day by day!





__ https://twitter.com/i/web/status/1181249654366883840

Reactions: Like Like:
1


----------



## Syed1.

Kabotar said:


> __ https://twitter.com/i/web/status/1181249654366883840


Not a single media house covered this....

Reactions: Like Like:
1


----------



## Danish saleem

Kabotar said:


> __ https://twitter.com/i/web/status/1181249654366883840


 and how much lost in last 1 years, 12000 Points, sir


----------



## Syed1.

Danish saleem said:


> and how much lost in last 1 years, 12000 Points, sir


On 26th May 2017 the market achieved its peak position of approximately 52,000. Then onwards it started plummeting and on 15th Dec 2017 it reached a value of 38,000. Can you do the math and tell me how much is the drop in mere 6 months? and also who was in the government in 2017?


Let me make it easy for you, the drop was 14,000 points and patwari's god Nawaz Sharif was in government. 


The day the PTI government took over the exchange stood at approximately 42,000 and was already continuing its downward trend. It now stands at 33,000. In case your math is weak that amounts to a difference of 9000 points. 


If you do not believe what I'm saying, you can go here and check for yourself. 

https://www.bloomberg.com/quote/KSE100:IND


----------



## Zulfiqar

Circular debt parked in PHPL have increased to PKR 700 B plus from 500 B plus figure last year. Don't know if these are new syndicate financing facilities or something else. 

This figure does not include debt in form of receivables (that were not converted into PHPL long term loans).


----------



## ziaulislam

Syed1. said:


> On 26th May 2017 the market achieved its peak position of approximately 52,000. Then onwards it started plummeting and on 15th Dec 2017 it reached a value of 38,000. Can you do the math and tell me how much is the drop in mere 6 months? and also who was in the government in 2017?
> 
> 
> Let me make it easy for you, the drop was 14,000 points and patwari's god Nawaz Sharif was in government.
> 
> 
> The day the PTI government took over the exchange stood at approximately 42,000 and was already continuing its downward trend. It now stands at 33,000. In case your math is weak that amounts to a difference of 9000 points.
> 
> 
> If you do not believe what I'm saying, you can go here and check for yourself.
> 
> https://www.bloomberg.com/quote/KSE100:IND



.if bad things are happening one day after PTI govt is its PTI fault
but a motorway completed 2 years after PTI govt will be, thank you nawaz sharif

i refused to admit this is knowledge issue..this is typical abu jahil issue, they know it their heart they are wrong but will still do it..thus its a waste of time to discuss such things

Reactions: Like Like:
1


----------



## Chak Bamu

ziaulislam said:


> .if bad things are happening one day after PTI govt is its PTI fault
> but a motorway completed 2 years after PTI govt will be, thank you nawaz sharif
> 
> i refused to admit this is knowledge issue..this is typical abu jahil issue, they know it their heart they are wrong but will still do it..thus its a waste of time to discuss such things


This is a bad faith argument. Period.

PTI was the driver of unrest during PML-N term. It got willingly used by Establishment. You are a die-hard PTI supporter, so I do not expect you to admit PTI's role in creating an unstable environment. But facts are facts and memories are still fresh. Do you want me to remind you of TLP dharna and PTI's support when it eagerly exploited the khatm-e-nabuwwat issue which it had helped create in the first place? Do you want me to remind you of the 2014 dharna? How about #ShutDownToRebuild, or Lock-down, or Occupy Islamabad by mobilizing KP government? You may wish to forget this stuff, but not me. Nobody can count the U-turns that IK & PTI has taken in the last few years. This is the credibility of the great Khan who Can't deliver anything he promised. Demagogues can never deliver, BTW.

As far as infrastructure development is concerned, a party whose standard line was "qomain saRkon se nahin bantin"(nations are not built by roads), PTI has zero / zilch / cipher right to claim even an iota of credit. It is disingenuous to make the argument that you are making. For all the infrastructure projects that have been built & that are being commissioned, it is #ThankYouNawazSahrif and very rightly so. The day PTI does in fact deliver something that it planned, budgeted, executed, & delivered, we will talk about it.

Before you even try to come back with a reply, think about Peshawar BRT because I will certainly take your favorite party to task for the fiasco. PTI has no experience and no inclination to learn. Its supporters are the same way. They do not want to admit to facts and would rather cherry pick news bits to claim that PTI is performing as a government, when the whole of Pakistan can see very clearly that such is not the case.

Dr. Sahib, those who live in USA and shove PTI down our collective throats should come and live here for to experience 'tabdeeli'.

Reactions: Like Like:
1


----------



## ziaulislam

Chak Bamu said:


> This is a bad faith argument. Period.
> 
> PTI was the driver of unrest during PML-N term. It got willingly used by Establishment. You are a die-hard PTI supporter, so I do not expect you to admit PTI's role in creating an unstable environment. But facts are facts and memories are still fresh. Do you want me to remind you of TLP dharna and PTI's support when it eagerly exploited the khatm-e-nabuwwat issue which it had helped create in the first place? Do you want me to remind you of the 2014 dharna? How about #ShutDownToRebuild, or Lock-down, or Occupy Islamabad by mobilizing KP government? You may wish to forget this stuff, but not me. Nobody can count the U-turns that IK & PTI has taken in the last few years. This is the credibility of the great Khan who Can't deliver anything he promised. Demagogues can never deliver, BTW.
> 
> As far as infrastructure development is concerned, a party whose standard line was "qomain saRkon se nahin bantin"(nations are not built by roads), PTI has zero / zilch / cipher right to claim even an iota of credit. It is disingenuous to make the argument that you are making. For all the infrastructure projects that have been built & that are being commissioned, it is #ThankYouNawazSahrif and very rightly so. The day PTI does in fact deliver something that it planned, budgeted, executed, & delivered, we will talk about it.
> 
> Before you even try to come back with a reply, think about Peshawar BRT because I will certainly take your favorite party to task for the fiasco. PTI has no experience and no inclination to learn. Its supporters are the same way. They do not want to admit to facts and would rather cherry pick news bits to claim that PTI is performing as a government, when the whole of Pakistan can see very clearly that such is not the case.
> 
> Dr. Sahib, those who live in USA and shove PTI down our collective throats should come and live here for to experience 'tabdeeli'.


I have not only lived in pakistan till 2015 but had no acess to electricity or gas(despite sitting on biggest source of power generation in the country, 30 billion units of power is produced by tarbela & ghazi and not a single penny comes to local area)..please dont use that line on me ..you have to be pretty bold to use the american card..

Whole discussion i see since PTI did destablizing events so should PML N do it?

I havr always had the opinion that PTI dharna was wrong

Reactions: Like Like:
1


----------



## Chak Bamu

ziaulislam said:


> I have not only lived in pakistan till 2015 but had no acess to electricity or gas(despite sitting on biggest source of power generation in the country, 30 billion units of power is produced by tarbela & ghazi and not a single penny comes to local area)..please dont use that line on me ..you have to be pretty bold to use the american card..
> 
> Whole discussion i see since PTI did destablizing events so should PML N do it?
> 
> I havr always had the opinion that PTI dharna was wrong



In 1996 I visited Ghani Kot/Kupri Amazai the remote area directly behind the Tarbela dam on the Pashtun side past Gadoon Amazai Industrial Area. Every hilltop, every hamlet had electricity, even if it required dozens of electricity poles. That was good 23 years ago. I find it hard to believe that you did not have access to electricity or power when you did live in the area. Moreover, KP does get part of hydel profits. It just gets spent where the provincial CM wants it spent, not necessarily where you live. So I believe your problem is with KP provincial government, not the federal government. Incidentally, parts of KP top the non-payer & loss-making grids. I suggest you spare a thought for those of us who live in places where payment is made at close to 100% rate.

Just read this thread carefully, including the interviews. You would find that PTI has the luxury of building a-top what was done by PML-N in terms of infrastructure development, particularly the energy projects included in CPEC. Just imagine if the newer & much more efficient plants had not come on line, what would have happened to the cost of production? Had RLNG not come on line, what would have happened to the energy mix? PTI got a far better situation compared to what PML-N got and they still can not get going. All that the PTI clowns and die hard supporters can think of is what PML-N did wrong, without an iota of shame at their own conduct for the past six and a half years. Its a crying shame really.... and to call others abu jahil and what not!


----------



## ziaulislam

Chak Bamu said:


> In 1996 I visited Ghani Kot/Kupri Amazai the remote area directly behind the Tarbela dam on the Pashtun side past Gadoon Amazai Industrial Area. Every hilltop, every hamlet had electricity, even if it required dozens of electricity poles. That was good 23 years ago. I find it hard to believe that you did not have access to electricity or power when you did live in the area. Moreover, KP does get part of hydel profits. It just gets spent where the provincial CM wants it spent, not necessarily where you live. So I believe your problem is with KP provincial government, not the federal government. Incidentally, parts of KP top the non-payer & loss-making grids. I suggest you spare a thought for those of us who live in places where payment is made at close to 100% rate.
> 
> Just read this thread carefully, including the interviews. You would find that PTI has the luxury of building a-top what was done by PML-N in terms of infrastructure development, particularly the energy projects included in CPEC. Just imagine if the newer & much more efficient plants had not come on line, what would have happened to the cost of production? Had RLNG not come on line, what would have happened to the energy mix? PTI got a far better situation compared to what PML-N got and they still can not get going. All that the PTI clowns and die hard supporters can think of is what PML-N did wrong, without an iota of shame at their own conduct for the past six and a half years. Its a crying shame really.... and to call others abu jahil and what not!


very well, you think i am lying..okay that kinda end this discussion ...

we had heated discussion before n PML N screwing up the current account deficit and circular debt in 2016..despite my wish that being not true it happened..pakistan was almost defaulted..

yeah line losses will be issue if you have electricity..but hey i am lying so...lol

who do you think is die hard fan of Mr sharif...see your 2016-2017 post and you will know..

give it year i will start criticizing PTI as well if they start doing "state bank lending" and cause havoc "in power and energy sector"....
*
making a dam as been an issue because neither the displaced of kashmir were given their share nor the tarbela affectes..billions of rupees in loyalities are still pending

my fundamental point is its bad to subsidize power and gas when official figures suggest that 36% people dont have electricity and 66% dont have gas(i am talking of different pakistan, you and alot of people from developed punjab think its 100%)*


----------



## Kabira

ziaulislam said:


> I have not only lived in pakistan till 2015 but had no acess to electricity or gas(despite sitting on biggest source of power generation in the country, 30 billion units of power is produced by tarbela & ghazi and not a single penny comes to local area)..please dont use that line on me ..you have to be pretty bold to use the american card..
> 
> Whole discussion i see since PTI did destablizing events so should PML N do it?
> 
> I havr always had the opinion that PTI dharna was wrong



Blame KP government for that who have gotten billions of $ in royalties since 1975. Even now federal government pay on average 3 times more to KP per unit compared to what for exemple India pays for hydro dams. On top of that they want to increase rate even further. Making dams electricity as expensive as thermal. BS


----------



## ziaulislam

Kabira said:


> Blame KP government for that who have gotten billions of $ in royalties since 1975. Even now federal government pay on average 3 times more to KP per unit compared to what for exemple India pays for hydro dams. On top of that they want to increase rate even further. Making dams electricity as expensive as thermal. BS


correct provincial govt carries the blame
but KPK still hasnt received all of its loyalties based upon revised formula agreement in 2008 and way less on AG formula


----------



## Kabira

ziaulislam said:


> correct provincial govt carries the blame
> but KPK still hasnt received all of its loyalties based upon revised formula agreement in 2008 and way less on AG formula



KP have received billions of $, they should have taken care of districts where dam is located. I already said that they are asking the rate to increase even further. Which is already way ahead of what other countries pay.


----------



## ejaz007

*Power sector circular debt surges to Rs1.9 trillion*

Listen






ISLAMABAD: The power sector circular debt continues to haunt Pakistan’s economy as it has swelled to almost Rs1.9 trillion as the payables have hit Rs990 billion mark and loans and liabilities parked in PHPL (Power Holding Private Limited) stand at Rs800 billion, a senior official at Power Division told The News.

‘This shows that the sitting government has piled up Rs800 billion in the circular debt which belies the claims of the government of scaling down the monthly inflow in the circular debt from Rs38 billion to Rs12 billion and will be reduced to zero by December 2020.’

During the ongoing talks with the government, hesaid, IMF mission is said to have also expressed its sheer dismay over the massive increase stock of circular debt.’ When the PTI government took the charge, the official said, the circular debt stood at Rs1.1 trillion after the completion of the caretaker regime. However, it was just less than Rs1 trillion when the PML-N government completed its tenure with Shahid Khaqan Abbasi as prime minister. According to the data available with The News the circular debt has precisely increased to Rs1.89 trillion by December 2019.

According to NEPRA officials, this incumbent government has already increased the tariff by 12.5 to 30 percent in power tariff by passing all inefficiencies, capacity charges, and Net Hydel Profit. Right now in the tariff the huge amount of Rs650 billion is already included in the head of capacity payment charges of powerhouses. The total capacity charges stand at Rs850 billion but out of it, Rs650 billion alone is part of the tariff. This means that full payment in the tariff is not included causing soaring circular debt. The required tariff rationalization is also not done as in the last quarterly tariff adjustment there was a gap of Rs72 billion which is not recovered yet. And more importantly, the Dollar-Rupee parity has also hit the power sector the most, as the tariff is determined in cents and the indexation of capacity payments is also in dollars.

The government has increased the power tariff by 12.5 percent for the consumers having no ToU meters (Time of Use) and 30 percent for the consumers having ToU meters. The government has already passed a huge amount of Rs226 billion to the end consumers which the PML-N government had not passed. This improved the cash flow situation in the power sector but from January 2020 onwards, this government does not seem to maintain the cash flow situation as the process of passing the past liabilities of Rs226 on to the end consumers was completed in January 2020.

Apart from it, the official said, in the past during PML-N government, NEPRA increased the permissible losses of tariff from 13.5 percent to 16.5 percent and the sitting government is stilling glued to that decision taken primarily because of the worsening law and order situation in many pockets of the country owing to which recovery of electricity bills was not possible. Now while the situation has normalised and there is no law and order situation across the country, but the increase in permissible losses by 3 percent in the tariff continues to exist and the government continues to fleece almost Rs148 billion per year from the compliant consumers. He said the revenue-based load shedding by the government of 3000- 5000MW at different times of the year continued which resulted in a great reduction in demand and owing to the reduced demand, the powerhouses remain idle which is why the payments of capacity payment have swelled manifold which is paid by the end consumers.

He said only rudimentary efforts were being made to increase electricity sales in Balochistan, KP and Sindh where huge swaths of areas are without regular power. This has led to an increase in discontent among the public because of which the federation is under pressure. The “CPEC power projects have also been allowed 80% mandatory off-take even when these do not come within the ambit of the Economic Dispatch Order. As these are highly over-invoiced, their tariffs are high and their huge impact is also reflected in the power tariff.

He added that the Qatar LNG used in power plants is overpriced and also on the take and pay contract saying it is again leading to an increase in tariff. The industrial experts are of the view that Nepra does not have the required necessary audit qualifications which is why the DISCOs are able to get their inflated claims accepted which is also causing a rise in the tariff. The same is true for the Monthly Fuel Price Adjustments. The CPPA(G) as the clearing house has become a tool for the Power Division and forces Nepra to accept all claims without proper audits.

The Power Division secretary, when contacted, said that the official, who deals with the circular debt, was in a meeting with the visiting IMF delegation. However, he added that the monthly inflows in circular debt had been decreased from Rs38 to Rs12-23 billion and the amount will come to zero by December end this year.

https://www.thenews.com.pk/print/612710-power-sector-circular-debt-surges-to-rs1-9-trillion


----------



## ziaulislam

ejaz007 said:


> *Power sector circular debt surges to Rs1.9 trillion*
> 
> Listen
> 
> 
> 
> 
> 
> ISLAMABAD: The power sector circular debt continues to haunt Pakistan’s economy as it has swelled to almost Rs1.9 trillion as the payables have hit Rs990 billion mark and loans and liabilities parked in PHPL (Power Holding Private Limited) stand at Rs800 billion, a senior official at Power Division told The News.
> 
> ‘This shows that the sitting government has piled up Rs800 billion in the circular debt which belies the claims of the government of scaling down the monthly inflow in the circular debt from Rs38 billion to Rs12 billion and will be reduced to zero by December 2020.’
> 
> During the ongoing talks with the government, hesaid, IMF mission is said to have also expressed its sheer dismay over the massive increase stock of circular debt.’ When the PTI government took the charge, the official said, the circular debt stood at Rs1.1 trillion after the completion of the caretaker regime. However, it was just less than Rs1 trillion when the PML-N government completed its tenure with Shahid Khaqan Abbasi as prime minister. According to the data available with The News the circular debt has precisely increased to Rs1.89 trillion by December 2019.
> 
> According to NEPRA officials, this incumbent government has already increased the tariff by 12.5 to 30 percent in power tariff by passing all inefficiencies, capacity charges, and Net Hydel Profit. Right now in the tariff the huge amount of Rs650 billion is already included in the head of capacity payment charges of powerhouses. The total capacity charges stand at Rs850 billion but out of it, Rs650 billion alone is part of the tariff. This means that full payment in the tariff is not included causing soaring circular debt. The required tariff rationalization is also not done as in the last quarterly tariff adjustment there was a gap of Rs72 billion which is not recovered yet. And more importantly, the Dollar-Rupee parity has also hit the power sector the most, as the tariff is determined in cents and the indexation of capacity payments is also in dollars.
> 
> The government has increased the power tariff by 12.5 percent for the consumers having no ToU meters (Time of Use) and 30 percent for the consumers having ToU meters. The government has already passed a huge amount of Rs226 billion to the end consumers which the PML-N government had not passed. This improved the cash flow situation in the power sector but from January 2020 onwards, this government does not seem to maintain the cash flow situation as the process of passing the past liabilities of Rs226 on to the end consumers was completed in January 2020.
> 
> Apart from it, the official said, in the past during PML-N government, NEPRA increased the permissible losses of tariff from 13.5 percent to 16.5 percent and the sitting government is stilling glued to that decision taken primarily because of the worsening law and order situation in many pockets of the country owing to which recovery of electricity bills was not possible. Now while the situation has normalised and there is no law and order situation across the country, but the increase in permissible losses by 3 percent in the tariff continues to exist and the government continues to fleece almost Rs148 billion per year from the compliant consumers. He said the revenue-based load shedding by the government of 3000- 5000MW at different times of the year continued which resulted in a great reduction in demand and owing to the reduced demand, the powerhouses remain idle which is why the payments of capacity payment have swelled manifold which is paid by the end consumers.
> 
> He said only rudimentary efforts were being made to increase electricity sales in Balochistan, KP and Sindh where huge swaths of areas are without regular power. This has led to an increase in discontent among the public because of which the federation is under pressure. The “CPEC power projects have also been allowed 80% mandatory off-take even when these do not come within the ambit of the Economic Dispatch Order. As these are highly over-invoiced, their tariffs are high and their huge impact is also reflected in the power tariff.
> 
> He added that the Qatar LNG used in power plants is overpriced and also on the take and pay contract saying it is again leading to an increase in tariff. The industrial experts are of the view that Nepra does not have the required necessary audit qualifications which is why the DISCOs are able to get their inflated claims accepted which is also causing a rise in the tariff. The same is true for the Monthly Fuel Price Adjustments. The CPPA(G) as the clearing house has become a tool for the Power Division and forces Nepra to accept all claims without proper audits.
> 
> The Power Division secretary, when contacted, said that the official, who deals with the circular debt, was in a meeting with the visiting IMF delegation. However, he added that the monthly inflows in circular debt had been decreased from Rs38 to Rs12-23 billion and the amount will come to zero by December end this year.
> 
> https://www.thenews.com.pk/print/612710-power-sector-circular-debt-surges-to-rs1-9-trillion


Pretty much expected 
I think it will hit around 2400 billion before levelig off(unless govt decides to go to old games)

Good thing is that privitization of power plants will give govt somehere between 500-600 billion the rest will have to be paid from budget
(We have to account large amount of devlauetion and huge interest rate on this loan as well)


----------



## ShaikhKamal

https://thediplomat.com/2020/02/is-pakistans-economy-recovering/

*Is Pakistan’s Economy Recovering?*

While there are positive signs, the IMF bailout conditions continue to pinch for average Pakistanis.





By Kunwar Khuldune Shahid
February 07, 2020
addressing the World Economic Forum at Davos in January, Prime Minister Imran Khan claimed that the year 2020 will be one of economic growth for Pakistan. Khan’s words echoed his vows to the domestic audience, as he has promised fiscal “development” in the country within the ongoing calendar year.

After a tumultuous first 12 months since the Pakistan Tehreek-e-Insaf (PTI) government took over in August 2018, the fiscal positives for the country have indeed been tangible in recent months.

In September, Pakistan’s current account deficit dropped by 80 percent to a 41-month low of $259 million, with a 111.5 percent rise in foreign direct investment (FDI) and 194 percent increase in private investment. With FDI of $1.34 billion during the first half of the current fiscal year, a 68.3 percent increase was registered in January, compared to $796.8 million of the same period of the previous fiscal year.

This month, the reserves of the State Bank of Pakistan (SBP) also hit a 21-month high at $11.586 billion. The economic positivity was also reflected by the Karachi Stock Exchange (KSE), which registered a 16-month high this month, crossing the 42,000 point mark after a cumulative increase of 13,000 points in four months.

The financial developments in Pakistan have been duly recognized globally as well, with Moody’s Investor Service upgrading Pakistan’s economy outlook from negative to stable in December. The World Bank has also acknowledged Pakistan as one of the top 10 “most improved” countries in the Ease of Doing Business Index.

Enjoying this article? Click here to subscribe for full access. Just $5 a month.

While there are positives aplenty, almost all of them have come in the aftermath of Pakistan reaching a 13th bailout agreement with the International Monetary Fund (IMF) in July last year. The agreement was designed to address a multitude of macroeconomic imbalances spearheaded by a balance of payment crisis.

The PTI government was much criticized for taking over nine months to go to the IMF. Finance Ministry officials revealed at the time that the initial plan under former Finance Minister Asad Umer had been to seek aid from other countries instead of approaching the Fund, for which a Finance Bill was also passed 12 months ago.

The delay meant that by the time the government implemented an IMF instructed market-driven currency exchange rate, the Pakistani rupee had already lost over 50 percent of its value against the U.S. dollar. However, in the six months since the IMF bailout agreement, the Pakistani rupee-U.S. dollar exchange rate has eased from around 165 to the current 155.

Pakistani rupee-U.S. dollar exchange rate artificially afloat around the 100 mark.

“There has been an annual 5 percent depreciation for the rupee against the [U.S.] dollar since at least the 1970s. Whenever you artificially fix the value – like [former Prime Minister] Shaukat Aziz fixed it around 60-65 or Dar at 100 – that depreciation isn’t allowed. And when you do that, the currency rates snaps back into its actual place [after the period of artificial valuation],” Financial Analyst at FX Empire Shahab Jafry told _The Diplomat._

“Currency markets work on trends and sentiments. This snap forms a self-fulfilling prophecy, which generates a multiplier effect. And as a result we have seen the [Pakistani] rupee fall over 40 percent and not the 20-25 percent it would have fallen over the previous four to five years,” he added.

While the IMF-dictated policies have steered the economy toward macro corrections, the impact on the masses has been especially jarring. Furthermore, the abovementioned delay in agreeing to the IMF terms meant that by the end of August 2019, inflation had hit an 87-month high of 11.6 percent. January saw a 12-year high inflation rate of 14.6, which the State Bank of Pakistan declared “transitory.”

SUBSCRIBE NEWSLETTER
The IMF conditions, coupled with the government’s negligence leading up to the bailout, continue to take their toll on the masses with persistent increase in prices of gas, power, and fuel. Furthermore, while inflation has caused an hike in the prices of commodities and food items, mismanagement has seen shortages of basic dietary ingredients like tomatoes, wheat, and sugar.

The state has attempted to address the inflation through the SBP maintaining a high policy rate at 13.25 percent, providing the increased interest rate as a savings incentive for the masses. However, critics argue that with the inflation being cost-push and not demand-pull, the enhanced rate won’t suffice in addressing it. Furthermore, the high interest rate is attracting overseas investment in treasury bills.

“The high investment is owing to carry trade, where overseas investors are putting their money here owing to the high interest rate – this is ‘hot money.’ When you’re getting hot money owing to high interest rate you’re reluctant to reduce the interest rate, especially when there are no triggers for growth,” maintains Shahab Jafry.

Enjoying this article? Click here to subscribe for full access. Just $5 a month.

Farrukh Saleem, a former spokesperson on economy for the PTI, says the government has been trapped by this hot money. “They’ve attracted the $2.2 billion owing to high interest rates – through treasury bills, and rupee convertible accounts. The interest rate in the U.S. is 1.75 percent, while Pakistan is offering 13.25 percent. So they are borrowing [U.S. dollars] and investing them. If the government lowers the interest rate, the investors will run away,” he told _The Diplomat._

Saleem, whose criticism of the government’s policies prompted the PTI government to disown him as their spokesperson last year, further argues that Pakistan’s economic outlook depends on which statistics you choose to read into.

In November, Federal Board of Revenue (FBR) reported a shortfall of 220.4 billion rupees in revenue collection. A 1 trillion-rupee shortfall is expected on the revenue target of 5.230 trillion, which had been revised in December from the original 5.503 trillion rupees at the start of the fiscal year.

2.7 million tax filers for tax year 2019 was almost twice the number of filers in the previous year, but still a fraction of the number of individuals that come under the tax net.

The PTI government had come to power over vows of accountability and transparency, which meant greater scrutiny on tax returns and a crackdown on largescale corruption, which Khan deems as the predominant reason behind Pakistan’s economic woes.

The government aims to bolster the economy by filling the fiscal holes caused by misappropriation, which resulted in the promulgation of the National Accountability (Second Amendment) Ordinance, 2019 in December.

Even so, given the fiscal impact felt by the masses in the first year-and-a-half of the PTI rule, a significant percentage of the populace has become more skeptical. Critics blast such measures for being “selective accountability” designed more to target political opponents than for any benefit to the economy.

This rings truer given the continued influence of former PTI General Secretary Jehangir Tareen over the government, despite having been disqualified by the Supreme Court. Furthermore, the PTI’s critics point to Tareen, and other business and mill owners in the PTI’s federal and provincial cabinets, who benefit from financial crises like inflated sugar prices.

Critics say there is a lack of economic growth in the country, which even Khan’s aide on commerce concedes, and question how the high interest rate could result in any progress for local businesses.

Salman Shah, the government’s financial advisor in Punjab, however, points to the extent of the economic crisis that the PTI inherited, and maintains that the worst is over.

“We’ve had to carry out painful reforms – made the exchange rate market-based, which led to massive devaluation and inflation particularly in energy products, and food inflation even more so, but we’ve been firefighting to ensure that the more vulnerable segments are brought into the social safety net to mitigate the impact of macro adjustment. The likes of Ehsaas Programme [to address inequality] and Kamyab Jawan [to provide opportunities to the youth] are prominent examples,” he told _The Diplomat._

“We need to see why we repeatedly go to the IMF. Structural transformations are needed in Pakistan’s production system – agriculture, industry, or services – to improve our productivity and export competitiveness,” says Shah. “Import substitution with domestic production, and export promotion is important. Car manufacturing, for instance, has been declining in the country because a lot of its constituents are imported – that needs to change. In agriculture, owing to devaluation our wheat has become cheaper in dollars, hence it is being increasingly smuggled, causing the current domestic shortage.”

Enjoying this article? Click here to subscribe for full access. Just $5 a month.

“[Meanwhile], exchange rate realignment have made our exports more competitive, but we need to make them even more robust. Energy and gas export sectors are being given regionally competitive prices. Yes, there are glitches, but they are being addressed. The uproar among the Faisalabad textile businesses [over energy prices] is not as much as it was a few months ago. Similarly, this so called ‘hot money’ owing to high interest rate is not a demon that we were better off without. In fact, the $2.2 billion that has come, means the domestic banks now have [an] extra $2.2 billion which they can lend to the private sector – when that happens, the yield curve would come down, bringing the interest rates down,” he adds.

Khan’s dealings in Davos, where he met U.S. President Donald Trump and IMF President Kristalina Georgieva, are also being seen as evidence of traction that Pakistan’s regional role is getting internationally.

The potential for increased U.S. influence in the region, amid the continued search for stability in Afghanistan, and the standoff with Iran following the killing of its Quds Force commander Qassem Soleimani, could be interpreted in the power corridors of Islamabad and Rawalpindi as an opportunity for the country to make itself useful for Washington again. However, Islamabad would have to counterbalance any financial gains from Washington with its trade-war adversary, Beijing, which continues to dictate the China-Pakistan Economic Corridor (CPEC).

Relaxation at the counterterror watchdog Financial Action Task Force (FATF) is one of many financial and geopolitical benefits that Islamabad will seek in exchange for letting the IMF run its economic affairs. It is based on IMF instructions that Pakistan has been asked to keep the interest rate higher than the inflation rate, with the government having been barred from borrowing money from its own central bank.

“The borrower feels the impact. If it’s for consumption then there is less consumption, if for investment then there is less investment. We’re basically running the IMF program. As things stand we are meeting all the indicators and targets given to us,” Shah says.

“However, the CPEC is a huge factor in increasing investment. Many foreign parties are coming and buying areas in the special economic zones. The first drops of rain have come,” he adds.

AUTHORS




GUEST AUTHOR
Kunwar Khuldune Shahid
VIEW PROFILE


----------



## ejaz007

*Circular debt increasing by Rs12 bn a month*

Listen





ISLAMABAD: Prime Minister Imran Khan on Monday directed for out-of-the-box solutions to reduce electricity and gas tariffs on sustainable basis. He gave this direction while chairing a high-level meeting to reduce electricity and gas tariffs and provide relief to domestic consumers and industries.

Among others, the meeting was attended by Minister for Energy Omar Ayub Khan, Adviser on Finance Dr Abdul Hafeez Sheikh and Minister for Planning and Development Asad Umar.

The prime minister said that without taking into account interest of the country, expensive and illogical agreements and arrangements were made by the previous governments, whichresulted in expensive electricity and circular debt. The prime minister was told that in order to prevent power theft, effective measures have been taken, which had resulted in an income of Rs122 billion.

The meeting was informed that monthly increase of Rs38 billion in circular debt has been reduced to Rs12 billion, which will be reduced to zero by the end of this year.

Imran Khan said that the top priority of the government was to provide relief to people with low-income segment. On his directions, various proposals were presented in order to stabilise and reduce electricity prices for domestic consumers and industries.

Special Assistant to Prime Minister on Petroleum Nadeem Babar presented suggestions for a long-term plan to reduce gas prices.

https://www.thenews.com.pk/print/615560-circular-debt-increasing-by-rs12-bn-a-month

Reactions: Like Like:
2


----------



## Syed1.

ejaz007 said:


> *Circular debt increasing by Rs12 bn a month*
> 
> Listen
> 
> 
> 
> 
> 
> ISLAMABAD: Prime Minister Imran Khan on Monday directed for out-of-the-box solutions to reduce electricity and gas tariffs on sustainable basis. He gave this direction while chairing a high-level meeting to reduce electricity and gas tariffs and provide relief to domestic consumers and industries.
> 
> Among others, the meeting was attended by Minister for Energy Omar Ayub Khan, Adviser on Finance Dr Abdul Hafeez Sheikh and Minister for Planning and Development Asad Umar.
> 
> The prime minister said that without taking into account interest of the country, expensive and illogical agreements and arrangements were made by the previous governments, whichresulted in expensive electricity and circular debt. The prime minister was told that in order to prevent power theft, effective measures have been taken, which had resulted in an income of Rs122 billion.
> 
> The meeting was informed that monthly increase of Rs38 billion in circular debt has been reduced to Rs12 billion, which will be reduced to zero by the end of this year.
> 
> Imran Khan said that the top priority of the government was to provide relief to people with low-income segment. On his directions, various proposals were presented in order to stabilise and reduce electricity prices for domestic consumers and industries.
> 
> Special Assistant to Prime Minister on Petroleum Nadeem Babar presented suggestions for a long-term plan to reduce gas prices.
> 
> https://www.thenews.com.pk/print/615560-circular-debt-increasing-by-rs12-bn-a-month





Should have read the news before sharing it. Your Nawaja Butt left a circular debt that was increasing at Rs. 38b a month:

*The meeting was informed that monthly increase of Rs38 billion in circular debt has been reduced to Rs12 billion which will be reduced to zero by the end of this year.*

Reactions: Like Like:
1


----------



## Turingsage

Circular debt is least of Pakistan's amazing debt profile. Getting rid of all circular debt still leaves Pakistan in need of huge unsustainable foreign loans just to tread water. 
There will be NO DEVELOPMENT budget for perhaps several generations

*A federation run on debt!*
By Hasaan Khawar
Published: February 18, 2020
TWEET EMAIL




Prime Minister Imran Khan. PHOTO: PID/FILE








*Last year for the first time in Pakistan’s history, the markup on the federal government’s outstanding debt exceeded its net revenue receipts. This means that by the time the federal government paid the interest cost on the existing debt, it had already surpassed its resources by about Rs53 billion (2018-19). The rest of the entire federal expenditure was undertaken with borrowed money.*

The federal government only gets 42.5% of the divisible pool but incurs 67% of the national expenditures. Unless this anomaly is removed, the government will keep on running into serious fiscal problems, weakening the federation’s capability to function effectively.

The federal-provincial resource distribution is decided under the National Finance Commission (NFC) Award. Under the 18th Amendment, Article 160 of the Constitution was amended to ensure that the share of the provinces in each NFC Award shall not be less than their share in the previous award. Any changes in this would require amending the Constitution, which in turn would require a hard-to-get consensus amongst the political parties. Nonetheless, sooner or later we’ll have to re-open the discussion around vertical distribution of resources.

But more importantly, there is a need to rationalise the disproportionate expenditure of the federal government. What goes into two-thirds of the country’s expenditure?

*Within the pie of the current federal expenditure, presently about 50% goes to debt servicing, 8-9% Within the pie of the current federal expenditure, presently about 50% goes to debt servicing, 8-9% goes to pension and superannuation allowances and another 13-14% goes to pay civil and military salaries. All these reflect government’s essential obligations, which are quite inflexible *at least in the short term without a goes to pension and superannuation allowances and another 13-14% goes to pay civil and military salaries. All these reflect government’s essential obligations, which are quite inflexible at least in the short term without any room for reduction.

*These rigid expenditures eat up about 110% of the net federal revenue receipts. By the time the federal government is done with discharging these obligations, it has already run out of its revenues by a wide margin. For all the other expenditures, whether it’s for building highways and power plants, running state-owned enterprises, purchasing defence equipment, or even repaying the loans, the federal government has to get new loans.*

*Under the huge salary and pension liabilities lies a complex system of state patronage where government employment is used more as a tool for buying loyalties and less for service delivery; contractual employees are made permanent with a stroke of a pen to buy votes with no regard to the pension liabilities they create;* and political compulsions and anxiety about the next election cycle takes precedence over concerns for the future generations.

*It’s hardly a surprise that in the last 10 years, the federal government’s pension expenditure has grown five-folds (from Rs85 billion in 2009-10 to Rs421 billion in 2019-20). In contrast, the federal government on an average spent a rupee on development for every four rupees spent on the current expenditure in 2009-10. By 2018-19, this unfortunately got squeezed to a rupee of development expenditure for every Rs11 of current expenditure.*

*We cannot keep on borrowing against the future forever, especially when all of this money is going down a bottomless pit. The issue of the ballooning government size is even more important than the much talked-about circular debt and state-owned enterprises. The latter could still be settled within a short span of time, given the political will. But to address the former, we need decades.*

We need to cut down the size of the government, through freezing recruitment for unproductive lower-rank positions constituting bulk of the government, tearing down useless ministries, abolishing unnecessary support staff positions, introducing a fully funded pension system and more. *Unless we start talking about this elephant in the room, no amount of loans, foreign capital, CPEC or IMF is going to address our economic woes.


https://tribune.com.pk/story/2158785/6-federation-run-debt/*


----------



## Zulfiqar

Pakistan is raising PKR 200 B for circular debt via energy sukuks (bonds) through PHL.

Another PKR 100 B is being raised via Power holding LTD for a short term in order to finance utility bill deficit owing to corona crisis.

This will add PKR 100 B to debt while PKR 200 B may be used to pay existing liabilities of CPPA. .

Term sheet of sukuk

https://nbp.com.pk/pes/files/Pakistan-Energy-Sukuk-II-Term-Sheet.pdf

Some interesting insights from DG Debt and an economist (to cover economy in general and our debt and power market e.t.c)


----------



## ziaulislam

the circular debt isnt the issue..the rise in circular debt is
mere 2400b rupees can be worked out..problem is it is still rising..Pakistan needs to acheive net zero


----------



## crankthatskunk

Turingsage said:


> First of all I was born in Uganda and consider Uganda to be second country after the UK. I have no great love of India or Pakistan. I do not hold a Indian passport nor have a desire to have one.
> As for Hindutwa the last time I attended a temple was many years ago only as a social necessity since I had the intelligence at age 13 that ALL RELIGIONS consist of dupes and charlatans that prey on the semi-intelligent of this world.
> Your debt problems are very real and no amount of deceit and self deception is going to cure it



Saying you came from Uganda, you still have Indian flag on your profile. Says something. 
It also bust your comment "you have no great love for India". 

Secondly, i am certain you are one of those Indians who had been expelled from Uganda and given refuge by the UK. I actually had been to Uganda and know first hand in what regard Indians are remembered there. 
Not only in Uganda but in most East African countries.


----------



## muhammadhafeezmalik

Syed1. said:


> Should have read the news before sharing it. Your Nawaja Butt left a circular debt that was increasing at Rs. 38b a month:
> 
> *The meeting was informed that monthly increase of Rs38 billion in circular debt has been reduced to Rs12 billion which will be reduced to zero by the end of this year.*



Source???


ziaulislam said:


> the circular debt isnt the issue..the rise in circular debt is
> mere 2400b rupees can be worked out..problem is it is still rising..Pakistan needs to acheive net zero



Government is increasing the price of electricity means shifting the burden of theft and mismanagement of energy department on honest consumer but even then the circular debt is rising, this is sheer incompetence.


----------



## VCheng

ziaulislam said:


> the circular debt isnt the issue..the rise in circular debt is
> mere 2400b rupees can be worked out..problem is it is still rising..Pakistan needs to acheive net zero



Mere "2400b" rupees is $15b or thereabouts, an amount comparable to the forex reserves. And increasing, albeit at a slower pace.


----------



## ziaulislam

VCheng said:


> Mere "2400b" rupees is $15b or thereabouts, an amount comparable to the forex reserves. And increasing, albeit at a slower pace.


Thay needs to paid in rupees to local IPP with almost half owned to govt based IPP/WAPDA

Its equal to 1.5 yrs of federal development (not provincial funds included) fund or equal to 1/3 of its single year fund

So federal govt van easily pay if off in 3-4 years if it just freezes its development fund(only federal development fund)

But the issue is its growing..if it even stops at 3 trillion it will be a sucess..
The govt can then sell bonds and do some book management to pay off the rest.

Of this 800b is already in govt debt and has been parked in liabilities
So the true deficit is issued 1600b rupees


----------



## VCheng

ziaulislam said:


> Thay needs to paid in rupees to local IPP with almost half owned to govt based IPP/WAPDA
> 
> Its equal to 1.5 yrs of federal development (not provincial funds included) fund or equal to 1/3 of its single year fund
> 
> So federal govt van easily pay if off in 3-4 years if it just freezes its development fund(only federal development fund)
> 
> But the issue is its growing..if it even stops at 3 trillion it will be a sucess..
> The govt can then sell bonds and do some book management to pay off the rest.
> 
> Of this 800b is already in govt debt and has been parked in liabilities
> So the true deficit is issued 1600b rupees



You may be correct in estimating that the debt is manageable. However, it remains one of the key suggestions of IMF, and no government, the present one included, has managed to actually stop the rise in debt, which shows the whole power sector, and its management, in a very poor light.


----------



## ziaulislam

VCheng said:


> You may be correct in estimating that the debt is manageable. However, it remains one of the key suggestions of IMF, and no government, the present one included, has managed to actually stop the rise in debt, which shows the whole power sector, and its management, in a very poor light.


the power sector is hemorrhaging 300 billion rupees per year

what needs to be done is reconcile this loss three prong strategy

1. renegotiating with IPPs, decreasing cost by introducing low cost renewable 
2. transmission loss & decreasing theft
3. increasing the tarrif and adding subsidies from the budget

govt estimates it would save 160-200b from IPPs doing away with capacity charges..IPPs seems to favor this because they think govt will in turn be able to increase supply and production 

however how to plug the rest is still an open question


===================================================================================

*Power sector reforms to save Rs300b*
Umar hits out at PML-N for setting up power plants despite lack of transmission network


Our CorrespondentNovember 24, 2020





PHOTO: EXPRESS
*ISLAMABAD:*
The government on Monday claimed that it had taken reform measures in the power sector that would result in cumulative savings of Rs300 billion over a period of three years from 2021 to 2023.
Talking to journalists, Minister for Planning, Development and Special Initiatives Asad Umar termed the circular debt a “landmine” for Pakistan and held the Pakistan Muslim League-Nawaz (PML-N) government responsible for all “sins”.
He lamented that the country lacked a transmission network for the transport of electricity but still the PML-N set up power plants to place burden of capacity payments on consumers. He claimed that capacity utilisation of power plants, which stood at 84% in 2018, dropped to 55% during Pakistan Tehreek-e-Insaf (PTI) government’s rule.
The planning minister, who also heads the Cabinet Committee on Energy (CCOE), said capacity payment obligation stood at Rs488 billion in 2018. The government projected that it would increase to Rs1.473 trillion by 2023 due to 55% capacity utilisation. A tariff increase of Rs4.09 per unit will be required in 2023 to clear Rs450 billion worth of circular debt base of 2018.
The government has also estimated another tariff increase of Rs8.09 per unit due to expected rise in capacity payments to Rs890 billion.
He said the PTI government had decided to get rid of the “centre of power” in the Power Division by introducing a competitive tariff regime to ensure cheaper energy.
He said the PML-N had increased power generation capacity but loadshedding continued across the country including Karachi due to a lack of investment in the transmission network.
“The Punjab government and other agencies had opposed LNG and coal-based power plants in the province but still they were established and now they have defaulted,” he said.
He added that the PTI government was introducing power sector reforms under which competitive tariffs would become possible under the bulk power market when the Competitive Trading Bilateral Contract Model (CTBCM) would come into force in the next 18 months and benefit the common consumers. The CTBCM was recently approved by the National Electric Power Regulatory Authority (Nepra).
He alleged that under the previous arrangement, politicians, bureaucrats and distribution companies as well as their officers had been benefiting because the price was being paid by the consumers.
The minister said a reduction in the rate of return on equity of public sector projects approved by the CCOE on September 2 would result in a reduction in the cost of generation by about Rs100 billion during 2021-23.
Likewise, memorandums of understanding signed with independent power producers (IPP) would have an impact of Rs60 billion during 2021-23.
He said the adviser to prime minister on finance was leading a committee to implement these MoUs.
Umar said the CCOE’s decision to unlock take-or-pay contracts of LNG-based power plants in Punjab would lead to cumulative savings of Rs136 billion in 2022-23 through tariff reduction at the rate of 74 paisa per unit in FY22 and 66 paisa per unit in FY23.
He did not agree that this burden had been shifted to gas companies, saying that he had separately undertaken another initiative that would ensure consumption of LNG in other areas.

Reactions: Like Like:
1


----------



## Affan-khan

THE government has extracted concessions worth several hundred billion rupees in future payments to the 47 independent power producers (IPPs) set up between 1990 and 2013 by forcing their hand but the ‘deal’ has left a bad taste in the mouths of their investors.

The government has secured the lucrative deal in exchange for promises of payment of Rs403 billion it owes to the IPPs. What makes the bargain sweeter for the government is the fact that it will pay only a third of the amount in cash; the remainder will be disbursed equally in 10-year bond and 5-year Sukuk. The power producers will get 40 per cent of their money upfront after signing ‘binding agreements’ revising the terms of their original power purchasing agreements and the rest in six months.

This is not all. Instead of paying cash, the government has extended contracts of 12 IPPs in exchange for an award of Rs92bn won by them in an international arbitration a few years ago. “This alone will save us Rs32bn since the extension in contracts will cost the government around Rs60bn,” Special Assistant to the Prime Minister on power Tabish Gauhar told _Dawn_ by telephone.

Moreover, the new revised agreements have a binding force for the IPPs, but will not be so much obligatory for the government as it retains the right to order forensic audit of their bills if and when it feels like. “The forensic audit option is there,” Mr Gauhar said. “It’ll be a major exercise and can have detrimental effects on (future) investments but it is a decision the government can take any time.”


Background interviews with senior executives of three power companies suggest that the IPPs may have been coerced into agreeing to new power purchasing agreements. They were unanimous in alleging that the government had used the Mohammad Ali Inquiry Committee report on the IPPs to build a case against the power producers and later force them into signing memorandums of understanding. “The threats of corruption inquiries and public humiliation through media trial are enough for a businessman to give in to the pressure from the government,” one of them said.

Khalid Mansoor, chief executive officer of Hubco, who was part of the process of negotiations, didn’t say anything when asked if the government had applied any kind of pressure on them to secure the deal from the IPPs. “This isn’t a deal. We have (voluntarily) given the government concessions for the stability of the power sector and the country and demanded nothing in return. The money they’ve agreed to pay us is ours and has been stuck with the government for the last many years,” he told this reporter from Karachi by telephone.

“We’ve given up Rs836bn in our profits (over a period of next 20 years) and we are still labelled as thieves and plunderers,” he said, pointing to the local arbitration ordered (under the agreement) on an amount of Rs53bn, which the government insists the 12 IPPs have received in excess payments. He said the concessions given by the IPPs would have an impact of Rs1.5 per unit of electricity.

Conversations with energy sector analysts suggest new contracts will significantly shrink future earnings of the IPPs after the removal of the dollar indexation from their returns (on equity), which was one of the main attractions for investors, and downward revision of their returns. “I see earnings of these IPPs shrinking at worst or stagnating at best,” one analyst said.

“The agreed changes in their power purchasing agreements will have a negative impact on the IPPs. The only positive for these companies is the settlement of their long overdue, unpaid bills, which are expected to alleviate liquidity pressures on them and reduce their reliance on borrowings to fund their operations.”

The agreements will cover 53 IPPs with a total capacity of around 8,000 megawatts or nearly 23pc of the installed generation in the country. “The agreements with the remaining six IPPs, including Kapco and Uch, will be signed in a few days as their foreign sponsors are not available at the moment,” Mr Gauhar said. The government owes them nearly Rs90bn in unpaid bills.

“Without going into a debate whether the agreements with the IPPs are fair or not, expensive or not, these are contractual dues of the power companies we are paying them. We have not given them an NRO. We have swallowed a ‘bitter pill’ but secured relief in return,” he argued

The agreements are part of the government strategy to resolve the issue of power sector circular debt. Mr Gauhar said the agreements with the IPPs would help reduce the existing circular debt stocks of Rs2.3 trillion — which includes Rs1tr parked with the state-owned power holding company and part of the public debt — down to Rs1.9tr.

“So once IPPs’ dues are paid, we will be left with circular debt stock of about Rs900bn with about Rs600bn to be paid to state-owned Gencos and around Rs200bn to the CPEC projects,” the SAPM added.

He also listed various measures the government is taking for the resolution of the power debt build-up in future by reforming the Discos to reduce their losses, encouraging electricity consumption to use large idle generation to cut capacity payments and so on.

He agreed that the power projects set up under the 2015 policy under or outside of the CPEC initiative were the bigger elephant in the room and said: “If we somehow succeed in convincing these companies to agree to the same terms we have offered the older IPPs, it will result in savings of Rs6,500bn-7,000bn over a period of 30 years.” But, he added, it was a sensitive matter (because it involved Chinese power companies and banks) and had to be settled by governments of Pakistan and China.”

The management of the IPPs and sector analysts are unanimous that the way the government has forced the power producers to agree to revise their contracts will have a long-term impact on investments in the power sector. “It will have negative fallout on future investments. The future investors might not find investments in future power projects economically viable after all (since the governments here cannot stick to the original agreements),” Khalid Mansoor argued.

If the past experience is anything to go by, the risk premium on energy projects will increase after this deal. But, of course, that will be in future. For now, the government appears to be in a celebratory mood.









ANALYSIS: What IPPs ‘deal’ means for power sector investment


If the past experience is anything to go by, the risk premium on energy projects will increase after this deal.



www.dawn.com

Reactions: Like Like:
1


----------



## ziaulislam

313ghazi said:


> Please note the article also states when the Govt took over it stood at Rs600 billion.
> 
> ---
> 
> Corrected thanks to @Kabotar


No it was at 1200.. With 600 parked else where
Plus there is 6-7% interest

Reactions: Like Like:
1


----------



## ziaulislam

Affan-khan said:


> THE government has extracted concessions worth several hundred billion rupees in future payments to the 47 independent power producers (IPPs) set up between 1990 and 2013 by forcing their hand but the ‘deal’ has left a bad taste in the mouths of their investors.
> 
> The government has secured the lucrative deal in exchange for promises of payment of Rs403 billion it owes to the IPPs. What makes the bargain sweeter for the government is the fact that it will pay only a third of the amount in cash; the remainder will be disbursed equally in 10-year bond and 5-year Sukuk. The power producers will get 40 per cent of their money upfront after signing ‘binding agreements’ revising the terms of their original power purchasing agreements and the rest in six months.
> 
> This is not all. Instead of paying cash, the government has extended contracts of 12 IPPs in exchange for an award of Rs92bn won by them in an international arbitration a few years ago. “This alone will save us Rs32bn since the extension in contracts will cost the government around Rs60bn,” Special Assistant to the Prime Minister on power Tabish Gauhar told _Dawn_ by telephone.
> 
> Moreover, the new revised agreements have a binding force for the IPPs, but will not be so much obligatory for the government as it retains the right to order forensic audit of their bills if and when it feels like. “The forensic audit option is there,” Mr Gauhar said. “It’ll be a major exercise and can have detrimental effects on (future) investments but it is a decision the government can take any time.”
> 
> 
> Background interviews with senior executives of three power companies suggest that the IPPs may have been coerced into agreeing to new power purchasing agreements. They were unanimous in alleging that the government had used the Mohammad Ali Inquiry Committee report on the IPPs to build a case against the power producers and later force them into signing memorandums of understanding. “The threats of corruption inquiries and public humiliation through media trial are enough for a businessman to give in to the pressure from the government,” one of them said.
> 
> Khalid Mansoor, chief executive officer of Hubco, who was part of the process of negotiations, didn’t say anything when asked if the government had applied any kind of pressure on them to secure the deal from the IPPs. “This isn’t a deal. We have (voluntarily) given the government concessions for the stability of the power sector and the country and demanded nothing in return. The money they’ve agreed to pay us is ours and has been stuck with the government for the last many years,” he told this reporter from Karachi by telephone.
> 
> “We’ve given up Rs836bn in our profits (over a period of next 20 years) and we are still labelled as thieves and plunderers,” he said, pointing to the local arbitration ordered (under the agreement) on an amount of Rs53bn, which the government insists the 12 IPPs have received in excess payments. He said the concessions given by the IPPs would have an impact of Rs1.5 per unit of electricity.
> 
> Conversations with energy sector analysts suggest new contracts will significantly shrink future earnings of the IPPs after the removal of the dollar indexation from their returns (on equity), which was one of the main attractions for investors, and downward revision of their returns. “I see earnings of these IPPs shrinking at worst or stagnating at best,” one analyst said.
> 
> “The agreed changes in their power purchasing agreements will have a negative impact on the IPPs. The only positive for these companies is the settlement of their long overdue, unpaid bills, which are expected to alleviate liquidity pressures on them and reduce their reliance on borrowings to fund their operations.”
> 
> The agreements will cover 53 IPPs with a total capacity of around 8,000 megawatts or nearly 23pc of the installed generation in the country. “The agreements with the remaining six IPPs, including Kapco and Uch, will be signed in a few days as their foreign sponsors are not available at the moment,” Mr Gauhar said. The government owes them nearly Rs90bn in unpaid bills.
> 
> “Without going into a debate whether the agreements with the IPPs are fair or not, expensive or not, these are contractual dues of the power companies we are paying them. We have not given them an NRO. We have swallowed a ‘bitter pill’ but secured relief in return,” he argued
> 
> The agreements are part of the government strategy to resolve the issue of power sector circular debt. Mr Gauhar said the agreements with the IPPs would help reduce the existing circular debt stocks of Rs2.3 trillion — which includes Rs1tr parked with the state-owned power holding company and part of the public debt — down to Rs1.9tr.
> 
> “So once IPPs’ dues are paid, we will be left with circular debt stock of about Rs900bn with about Rs600bn to be paid to state-owned Gencos and around Rs200bn to the CPEC projects,” the SAPM added.
> 
> He also listed various measures the government is taking for the resolution of the power debt build-up in future by reforming the Discos to reduce their losses, encouraging electricity consumption to use large idle generation to cut capacity payments and so on.
> 
> He agreed that the power projects set up under the 2015 policy under or outside of the CPEC initiative were the bigger elephant in the room and said: “If we somehow succeed in convincing these companies to agree to the same terms we have offered the older IPPs, it will result in savings of Rs6,500bn-7,000bn over a period of 30 years.” But, he added, it was a sensitive matter (because it involved Chinese power companies and banks) and had to be settled by governments of Pakistan and China.”
> 
> The management of the IPPs and sector analysts are unanimous that the way the government has forced the power producers to agree to revise their contracts will have a long-term impact on investments in the power sector. “It will have negative fallout on future investments. The future investors might not find investments in future power projects economically viable after all (since the governments here cannot stick to the original agreements),” Khalid Mansoor argued.
> 
> If the past experience is anything to go by, the risk premium on energy projects will increase after this deal. But, of course, that will be in future. For now, the government appears to be in a celebratory mood.
> 
> 
> 
> 
> 
> 
> 
> 
> 
> ANALYSIS: What IPPs ‘deal’ means for power sector investment
> 
> 
> If the past experience is anything to go by, the risk premium on energy projects will increase after this deal.
> 
> 
> 
> www.dawn.com


But but IK didnt clean nawaz sharif and zardari shit faster..so lets bring in the combo to test the next saviour ..and see if next saviour can clean the shit faster

This is cusp of our educated people thinking

Shameless
Once these deals are finalizef we will have clearer picture by end of this yr

Reactions: Like Like:
3


----------



## ejaz007

*Circular debt: The perennial problem*
BR Research 09 Mar 2021

Facebook

Twitter

Whatsapp

Comments





No amount of upward electricity tariff adjustment would put an end to the circular debt menace. There has been enough evidence of the same for well over a decade. What did not work yesterday, will not suddenly work tomorrow. It will not hurt to stop pretending the revenues measures as the means to end the circular debt accumulation.
The government recently informed a parliamentary standing committee of the state of affairs on circular debt. Rest assured, the state is dire. As it has been for what now seems like an eternity. Some corners of the government were seen taking credit for the ‘reduced pace’ of the circular debt accumulation. One wonders where the pride in is reducing the pace of circular debt from Rs35 billion a month to Rs31 billion a month. If anything, this should ring more alarm bells and not the sense of comfort one sees.
The grim numbers tell the story. The stock is believed to have crossed Rs2.3 trillion as of December 2020 and is well on its way to clock Rs2.6 trillion by the time FY21 ends. If such numbers can be spun on the basis of year-on-year comparisons – that is a cause of worry and not jubilation. The contributors to the circular debt stock continue to remain the same old – from delayed tariff notifications to the perennial T&D losses and recovery at the discos, from the ill-timed clearance of subsidies to the inability to implement quarterly adjustment in time.
With the recent increase in base tariff across consumer categories, expect the pace of increase to slowdown a tad – but that is what has accounted for in the estimated increase of Rs436 billion for the year by June end 2021. Recall that the stock parked with the PHPL is treated as the country’s debt, where interest keeps compounding, and the mounting servicing cost contributes to the already unsustainable fiscal deficit.





It is the consumer that ends up paying for all the inefficiencies – at times in the form of increased base tariffs, or monthly and quarterly adjustments, or through paying for interest on the stock forgoing a substantial amount that could have otherwise been utilized for better purposes. Granted that the recent efforts to renegotiate terms with the IPPs will yield substantial savings over the long-term, but that pales in comparison to the quantum of the task at hand.
No amount of clearing the circular debt by any fancy way, be it cash or government securities will put an end to the menace. These are stopgap measures, different versions of which have been tried in the past. This will undoubtedly slowdown the increase for a little while and improve liquidity in the chain, but without addressing the root causes, there is no end to the problem.
The discos bleeding has continued unbated, and that gives a Rs200 billion head start to circular debt. The recovery at 90 percent is a problem that is bigger than the T&D losses at 18 percent, of which 15 percent is already allowed by the regulator. The inefficiencies at the generation end time and again lead to higher monthly adjustment requirements, which further complicates the payment chain between fuel suppliers and power producers. The problem has been around for long enough for the policymakers to know the solutions. Short sightedness is not an option. It was high time ten, five, three, two, or one year ago to get the act together. It won’t hurt to undertake real reforms before it gets beyond repair.





__





Circular debt to be Rs50-60 billion by July 2020


THE government has extracted concessions worth several hundred billion rupees in future payments to the 47 independent power producers (IPPs) set up between 1990 and 2013 by forcing their hand but the ‘deal’ has left a bad taste in the mouths of their investors. The government has secured the...



defence.pk


----------



## War Thunder

Turingsage said:


> Amazingly Imran is going to leave a far bigger debt problem than Nawaz or Zardari according to the IMF. But the PTI retards refuse to see whats in front of their face and attribute all ills on Nawaz. Funny if it was not sad.
> 
> 
> THE EXPRESS TRIBUNE > BUSINESS
> *Pakistan’s debt pile to swell to 84.1% of GDP by 2023*
> By Shahbaz Rana
> Published: April 11, 2019
> 0SHARES
> SHARE TWEET EMAIL
> 
> 
> 
> 
> The IMF has not shown any improvement in fiscal indicators till 2023-24. It has shown the budget deficit at 7.6% of GDP by 2023 and 7.7% by 2024. PHOTO: FILE
> 
> ISLAMABAD: *The debt pile that Prime Minister Imran Khan would leave behind at the end of his five-year term will be equal to 84.1% of the size of Pakistan’s economy – far higher than the gross public debt at the end of the PML-N government, suggests a new report of the International Monetary Fund (IMF).
> 
> The report, released on Wednesday from Washington, puts PM Imran’s claim of reducing the country’s debt to test. In its annual flagship report “Fiscal Monitor – Curbing Corruption”, the IMF has shown the public debt-to-GDP ratio at 84.1% of gross domestic product (GDP) by 2023, higher by 12 percentage points than the level left behind by the PML-N government.
> 
> The report also says that Pakistan’s total financing needs have shot up alarmingly to 42.3% of the size of its economy, or Rs16 trillion, due to maturing debt and yawning budget deficit – a trend that will further worsen in the next fiscal year.
> 
> The IMF has released Pakistan’s fiscal indicators for the next five years, which portray that the country will sink deeper into debt. *The IMF has given these indicators in terms of GDP that The Express Tribune has translated into rupees by using the projected size of the economy in fiscal year 2018-19 ending June 30 and fiscal year 2019-20.
> 
> *At the end of the PML-N’s term, Pakistan’s gross public debt was equal to 72.1% of GDP, which the IMF said would increase to 77% at the end of current fiscal year. By fiscal year 2019-20, the debt-to-GDP ratio would be 79.1% and it would gradually swell to 84.1% of GDP, stated the report.*
> 
> Last week, Finance Minister Asad Umar said Pakistan’s gross public debt would remain at 70% of GDP by 2023 as no sharp reduction was possible. But the IMF projections were significantly higher than what Umar planned to do.
> 
> Under the Fiscal Responsibility and Debt Limitation Act, Pakistan’s debt should not be more than 60% of GDP.
> 
> According to the report, Pakistan’s budget deficit – the gap between expenditures and revenues – will widen to 7.2% of GDP or Rs2.8 trillion in the current fiscal year.
> 
> IMF’s projected budget deficit is Rs550 billion, or 1.6% of GDP, higher than what the finance ministry has estimated in its revised budget. *This paints quite an alarming picture, suggesting that the PTI government will not only miss its first year’s budget deficit target but would also borrow more than its estimates.*
> 
> During the current fiscal year, the public debt, equal to 35.1% of GDP, will mature, said the IMF. This will be equal to Rs13.4 trillion. On the basis of budget deficit and maturing debt, the IMF has estimated total financing needs at Rs16 trillion or 42.3% of GDP for this financial year, FY19.
> 
> Times are tough but economy will improve: Asad Umar
> 
> Majority of the financing needs are related to maturing domestic debt that the government meets by getting these loans rolled over.
> 
> *For next fiscal year 2019-20, the IMF has estimated that Pakistan’s total financing needs would surge to 46% of GDP or Rs19.3 trillion.* The international lender has estimated budget deficit at 8.7% of GDP or nearly Rs3.7 trillion. The debt maturity has been estimated at Rs15.6 trillion or 37.2% of GDP, according to the report.
> 
> The IMF has not shown any improvement in the fiscal indicators till 2023-24. It has shown the budget deficit at 7.6% of GDP by 2023 and 7.7% by 2024. These assumptions are based on the premise that the revenues would remain below 15% of GDP in the next five years – even lower than 15.3%, the level left behind by the PML-N.
> 
> The IMF has estimated that expenditures would remain over 22.3% of GDP in the next five years, higher than the level at the end of last fiscal year.
> 
> The IMF has also shown the primary deficit for next five years, which is calculated by excluding interest payments. In its programme negotiations, the lender has been pushing Pakistan to show primary balance that can only be achieved by either cutting the development budget or the defence spending.
> 
> In its projections, IMF has shown the primary deficit over 2% of GDP for the next five year. But in its economic roadmap, the Ministry of Finance has shown the primary balance in the range of 0.8% of GDP to 2% of GDP. The ministry has shown the primary balance on the back of a steep increase in the revenue, which the IMF is not recognising.
> 
> Corruption
> 
> The fiscal monitor’s report states that a common element of many anticorruption reforms is increasing civil servants’ wages. In theory, this helps by reducing the need for civil servants to request bribes to complement very low wages and deterring corrupt activities by raising the cost of being caught.
> 
> *However, there is insufficient evidence that raising wages by itself can play a prominent role in fighting corruption. “On performance-related incentives, an experiment in Pakistan also shows the potential for undesirable consequences: while performance-based salaries of tax officials led to a significant increase in tax collection by as much as 50%, bribe requests also increased by 30%,”added the IMF report. *
> 
> _Published in The Express Tribune, April 11th, 2019.
> 
> https://tribune.com.pk/story/1947798/2-pakistans-debt-pile-swell-84-1-gdp-2023/_






Too dumb to read what's in OP? Or just blinded in general?

@The Eagle Check this chick trying to turn a thread to his own liking without having a clue on what was in OP


Turingsage said:


> First of all I was born in Uganda and consider Uganda to be second country after the UK. I have no great love of India or Pakistan. I do not hold a Indian passport nor have a desire to have one.
> As for Hindutwa the last time I attended a temple was many years ago only as a social necessity since I had the intelligence at age 13 that ALL RELIGIONS consist of dupes and charlatans that prey on the semi-intelligent of this world.
> Your debt problems are very real and no amount of deceit and self deception is going to cure it




Being born in Uganda doesn't change the fact that you inherit the low IQ genes from your indian forebears.


----------



## Affan-khan

Affan-khan said:


> The agreements are part of the government strategy to resolve the issue of power sector circular debt. Mr Gauhar said the agreements with the IPPs would help reduce the existing circular debt stocks of Rs2.3 trillion — which includes Rs1tr parked with the state-owned power holding company and part of the public debt — down to Rs1.9tr.
> 
> “So once IPPs’ dues are paid, we will be left with circular debt stock of about Rs900bn with about Rs600bn to be paid to state-owned Gencos and around Rs200bn to the CPEC projects,” the SAPM added.




so only 900 Billion out of 2.3 trillion left.
600 billion gencos
200 billion cpec projects
90 billion 6 IPP's

if they convince the chinese on same agreement then hopefully it will reach 0


----------



## ziaulislam

Affan-khan said:


> so only 900 Billion out of 2.3 trillion left.
> 600 billion gencos
> 200 billion cpec projects
> 90 billion 6 IPP's
> 
> if they convince the chinese on same agreement then hopefully it will reach 0


point is this is still IFs and Buts..nothing has been signed yet

once private IPPs are paid off and if CPEC projects are renegotiated then rest of the money can simply be adjusted

Reactions: Love Love:
1


----------



## Chak Bamu

So what happened? I guess some people discovered that there are no miracle cures after all?

Just do one thing: account for all the possible generation capacity that costs less than Furnace Oil and treat it as a capacity that must be utilized at 100%. Whatever is left beyond that may be treated as a necessary evil which may be phased out as lower cost projects come on line. If proportion of electric power generated via FO increases (it has) then heads must roll (has not happened so far and shall not happen during this government).

This government's LNG fiasco has shown where the problems lie. FO consumption increased while most efficient thermal power stations (ones based on LNG) were shut down. It is ineptitude compounded by fat cats enjoying commissions on FO. The relevant ministers should have had laser-sharp focus on fuel mix but sadly that has not happened since 2018.

Reactions: Like Like:
1


----------



## ZAMURD

ziaulislam said:


> point is this is still IFs and Buts..nothing has been signed yet
> 
> once private IPPs are paid off and if CPEC projects are renegotiated then rest of the money can simply be adjusted


What is future gonna look like??


----------



## ziaulislam

ZAMURD said:


> What is future gonna look like??


Future is bright as more hydro come in and solar become cheaper its present and near term that isnt looking good

Reactions: Like Like:
2


----------



## cricketrulez

ziaulislam said:


> if CPEC projects are renegotiated



huh? renegotiate with the chinese? good luck!


----------



## ziaulislam

cricketrulez said:


> huh? renegotiate with the chinese? good luck!


Well i guess we will simply defualt and give a bad name to all CPEC/OBOR rather thn chinese adjusting the tarrif abit


----------



## cricketrulez

ziaulislam said:


> Well i guess we will simply defualt and give a bad name to all CPEC/OBOR rather thn chinese adjusting the tarrif abit



The risk for china is everyone will try to pull the same game. So OBOR might be screwed eitherway.


----------



## ziaulislam

cricketrulez said:


> The risk for china is everyone will try to pull the same game. So OBOR might be screwed eitherway.


Chinese should have thought about this before hand rather than going on an unrealistic return of investment startegy

Who in their right mind think they will get an ROR of 20% on thermal power plants


----------



## cricketrulez

ziaulislam said:


> Chinese should have thought about this before hand rather than going on an unrealistic return of investment startegy
> 
> Who in their right mind think they will get an ROR of 20% on thermal power plants



So why did Pakistan sign on the dotted line?


----------

