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Circular debt to reach Rs2.8tr in next four months, NA panel told

maithil

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As new largely coal-fired plants come online, Pakistan is expected by 2023 to have 50pc more power capacity than currently needed.

Because the government must repay loans taken to build the plants and has signed contracts to buy their power, the overcapacity is producing costs “the government has to pay to the power producers under binding contracts, regardless of actual need”, Mr Gauhar said.

“Our fixed-capacity charges have gone through the roof,” he added. Those costs currently stand at Rs850 billion a year, but will rise to almost Rs1.45 trillion a year by 2023 as new largely coal-fired power plants still being built come online, he said.
"


So capacity payment will surge to 1.45 trillion in next 2 years. Amazing negotiation.
 

Mav3rick

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Only Noonies can explain this since they defend Cpec contracts like crazy
@Muhammad Omar @Mav3rick @muhammadhafeezmalik @syedtalhamaududi
Youthiye, at this point I would welcome PPP over PTI, would that make me a Jiyala? It is PTI that I oppose, particularly the munafiqeen (Imran Khan specially and others like Murad Saeed, Vawda, Aamir Liaquat and so many others).

As for CPEC, a project that was initiated under Musharraf (by the Military), got started under PPP (by the Military), got most of its phase-1 implementation under PML (by the Military) does have the potential to be a game changer for Pakistan. The trade that will eventually be routed through CPEC for China, Middle East, far East, Central Asia and Africa would be astronomical and we would benefit from commerce on our land, by-products such as refineries, assembling, loading/unloading and supporting businesses etc. Atleast, that is the idea behind CPEC.

Your fundamental problem is that you are focused more on disrespecting others rather than to make positive contributions and that tells a lot about your background and yourself as a person. And the fact that you understand almost nothing but are a breed of Twitter, Facebook and other social media sites where you hide behind content that suits your rhetoric. And this is why many here don't bother responding to you.
 

blueazure

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Youthiye, at this point I would welcome PPP over PTI, would that make me a Jiyala? It is PTI that I oppose, particularly the munafiqeen (Imran Khan specially and others like Murad Saeed, Vawda, Aamir Liaquat and so many others).

As for CPEC, a project that was initiated under Musharraf (by the Military), got started under PPP (by the Military), got most of its phase-1 implementation under PML (by the Military) does have the potential to be a game changer for Pakistan. The trade that will eventually be routed through CPEC for China, Middle East, far East, Central Asia and Africa would be astronomical and we would benefit from commerce on our land, by-products such as refineries, assembling, loading/unloading and supporting businesses etc. Atleast, that is the idea behind CPEC.

Your fundamental problem is that you are focused more on disrespecting others rather than to make positive contributions and that tells a lot about your background and yourself as a person. And the fact that you understand almost nothing but are a breed of Twitter, Facebook and other social media sites where you hide behind content that suits your rhetoric. And this is why many here don't bother responding to you.

if i remember correctly, Mr umar ayub claimed back in 2018 that circular debt would be zero by dec 2020


where do we stand today ?






 

Bilal.

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ejaz007

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Circular debt: PTI govt running around in circles
25 Feb 2021

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EDITORIAL: The government has informed the standing committee on finance that energy sector’s circular debt is likely to increase by 436 billion rupees by the end of the ongoing fiscal year taking the total to 2.6 trillion rupees. This claim was challenged by the chairman of the committee who contended that as per the documents provided to the committee, the circular debt is projected to rise by 500 billion rupees by end June 2021, prompting the Additional Secretary Power to clarify that subsequent to an adjustment of 64 billion rupees and the recent increase in tariffs the circular debt projection has been revised downward from 2.8 trillion rupees to 2.6 trillion rupees. This, he further claimed, reflected a decline in the rate of rise from the first half of the current year when circular debt rose from 2.1 trillion rupees by end June 2021 to 2.3 trillion rupees by end December 2021.

The government official acknowledged that the debt parked inside PHPL, a mechanism established during the tenure of Shaukat Tarin as the Finance Minister when the country was on a Stand-By Arrangement with the International Monetary Fund, has been converted into the country’s total debt, as recommended by multilaterals - a decision with implications on total debt servicing and consequently on the budget deficit which was already unsustainable at the time Imran Khan-led Pakistan Tehrik-e-Insaf (PTI) came to power. An increasing budget deficit, in turn, impacts on inflation that remains resistant to mitigating policy/administrative measures.

The initial objective of parking the debt inside PHPL was to clear it slowly through higher tariffs – an objective that remains unfulfilled to this day with the consumers paying ever-rising tariffs to: (i) meet the interest payments of rising sectoral borrowing due to sectoral inefficiencies; and (ii) generate government revenue through the levy of taxes on electricity. Equally disturbing is the fact that the government recently sought the power to levy surcharges which is being resisted by the relevant standing committee members.
The Additional Secretary further identified the components of circular debt as follows: (i) 3.5 percent technical and distribution losses over and above those allowed by National Electric Power Regulatory Authority (Nepra) which contribute 17 billion rupees to circular debt for each percentage differential. In other words, there is an addition of 59.5 billion rupees each year under this head; (ii) inefficiencies in distribution companies contributing 170 billion rupees each year; (iii) 100 billion rupees non-payment by K-Electric; and (iv) the need for higher subsidies than budgeted and in the current year alone an additional amount of 197 billion rupees is required to provide relief to the poor.

The foregoing indicates sustained poor performance of the sector, a trend which has worsened since August 2018 as the circular debt has risen from 1.2 trillion rupees to 2.3 trillion rupees today projected to rise to 2.6 trillion rupees by end June 2021 – a historic rise in less than three years of 116 percent. And this is in spite of the massive rise in tariffs – a policy that unfortunately was also followed by the previous administrations.

Sadly, the foregoing does not provide any comfort level to the general public subjected to over 6 rupee per unit increase in three concurrent announcements since January 2021. Notwithstanding lower energy consumption in the winter months, unlike in the West upcountry areas rely on gas for heating, as well as reduced demand due to the pandemic the average householder has witnessed a significant rise in the electricity bill payable for January with concern being voiced as to the ability to clear bills in summer when consumption rises. There is evidence to suggest that however poor the performance was during previous administrations it has not improved one iota since the Khan administration took over power; and has in effect deteriorated since. Clearly, the beneficial impact of the deal with Independent Power Producers (IPPs) has neither filtered onto the sector nor to the consumers and the projection of savings of around 800 billion rupees over the next 20 years appears to be too much into the future to generate a comfort level today. One would hope that the circular debt is slashed without diverting it to national debt.
Copyright Business Recorder, 2021

 

Norwegian

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Norwegian

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The government official acknowledged that the debt parked inside PHPL, a mechanism established during the tenure of Shaukat Tarin as the Finance Minister when the country was on a Stand-By Arrangement with the International Monetary Fund, has been converted into the country’s total debt, as recommended by multilaterals - a decision with implications on total debt servicing and consequently on the budget deficit which was already unsustainable at the time Imran Khan-led Pakistan Tehrik-e-Insaf (PTI) came to power. An increasing budget deficit, in turn, impacts on inflation that remains resistant to mitigating policy/administrative measures.
Ah Patwaris+Jiyalas telling us the mess was created by PTI.
 

blueazure

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Circular debt: PTI govt running around in circles
25 Feb 2021
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EDITORIAL: The government has informed the standing committee on finance that energy sector’s circular debt is likely to increase by 436 billion rupees by the end of the ongoing fiscal year taking the total to 2.6 trillion rupees. This claim was challenged by the chairman of the committee who contended that as per the documents provided to the committee, the circular debt is projected to rise by 500 billion rupees by end June 2021, prompting the Additional Secretary Power to clarify that subsequent to an adjustment of 64 billion rupees and the recent increase in tariffs the circular debt projection has been revised downward from 2.8 trillion rupees to 2.6 trillion rupees. This, he further claimed, reflected a decline in the rate of rise from the first half of the current year when circular debt rose from 2.1 trillion rupees by end June 2021 to 2.3 trillion rupees by end December 2021.

The government official acknowledged that the debt parked inside PHPL, a mechanism established during the tenure of Shaukat Tarin as the Finance Minister when the country was on a Stand-By Arrangement with the International Monetary Fund, has been converted into the country’s total debt, as recommended by multilaterals - a decision with implications on total debt servicing and consequently on the budget deficit which was already unsustainable at the time Imran Khan-led Pakistan Tehrik-e-Insaf (PTI) came to power. An increasing budget deficit, in turn, impacts on inflation that remains resistant to mitigating policy/administrative measures.

The initial objective of parking the debt inside PHPL was to clear it slowly through higher tariffs – an objective that remains unfulfilled to this day with the consumers paying ever-rising tariffs to: (i) meet the interest payments of rising sectoral borrowing due to sectoral inefficiencies; and (ii) generate government revenue through the levy of taxes on electricity. Equally disturbing is the fact that the government recently sought the power to levy surcharges which is being resisted by the relevant standing committee members.
The Additional Secretary further identified the components of circular debt as follows: (i) 3.5 percent technical and distribution losses over and above those allowed by National Electric Power Regulatory Authority (Nepra) which contribute 17 billion rupees to circular debt for each percentage differential. In other words, there is an addition of 59.5 billion rupees each year under this head; (ii) inefficiencies in distribution companies contributing 170 billion rupees each year; (iii) 100 billion rupees non-payment by K-Electric; and (iv) the need for higher subsidies than budgeted and in the current year alone an additional amount of 197 billion rupees is required to provide relief to the poor.

The foregoing indicates sustained poor performance of the sector, a trend which has worsened since August 2018 as the circular debt has risen from 1.2 trillion rupees to 2.3 trillion rupees today projected to rise to 2.6 trillion rupees by end June 2021 – a historic rise in less than three years of 116 percent. And this is in spite of the massive rise in tariffs – a policy that unfortunately was also followed by the previous administrations.

Sadly, the foregoing does not provide any comfort level to the general public subjected to over 6 rupee per unit increase in three concurrent announcements since January 2021. Notwithstanding lower energy consumption in the winter months, unlike in the West upcountry areas rely on gas for heating, as well as reduced demand due to the pandemic the average householder has witnessed a significant rise in the electricity bill payable for January with concern being voiced as to the ability to clear bills in summer when consumption rises. There is evidence to suggest that however poor the performance was during previous administrations it has not improved one iota since the Khan administration took over power; and has in effect deteriorated since. Clearly, the beneficial impact of the deal with Independent Power Producers (IPPs) has neither filtered onto the sector nor to the consumers and the projection of savings of around 800 billion rupees over the next 20 years appears to be too much into the future to generate a comfort level today. One would hope that the circular debt is slashed without diverting it to national debt.
Copyright Business Recorder, 2021


and let me Explain this to the 5 year old Nordic troll of PeeTeeI


1. the current govt HAS maintained the same capacity payment regime as of last govt's of zardari and Noon. nothing has changed . umar ayub is making a fool out of PM khan

2. the only thing that has been re negotiated is the ROE and dollar indexation . however, the impact of this on end user is negligible

3. electricity prices for common consumers will keep on rising ( as evidenced by the recent hike)

4. having worked in the power sector , i can safely claim that IPPs were willing to accommodate cost plus tarriffs , however, there is inside chatter of some massive financial irregularity over a 'deal' to maintain capacity payments . the Nordic troll with a pea brain will never comment on this ofc
 

Norwegian

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1. the current govt HAS maintained the same capacity payment regime as of last govt's of zardari and Noon.
Capacity payment regime is binding because of long term contracts signed by previous govts, intelligent patwari.
Es5aof3XYAEpPms.jpg
Es5anZiXIAAF2mU.jpg

2. the only thing that has been re negotiated is the ROE and dollar indexation . however, the impact of this on end user is negligible
For now. It will however save hundreds of billions of Rs for years to come.

3. electricity prices for common consumers will keep on rising ( as evidenced by the recent hike)
Of course. Pakistan still produces the most expensive electricity in the region thanks to past govts binding IPP contracts signed by their experienced experts.
EsT_2zEXMAAeWaQ.png


however, there is inside chatter of some massive financial irregularity over a 'deal' to maintain capacity payments .
Chatter is not proof of anything Patwari. Where is the evidence?
 

Norwegian

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i will delete my PDF account if electricity tariff is reduced in this current govt
Why would it reduce? Who is going to payback 2 trillion Rs circular debt but ever increasing electricity price? It is pure and simple mathematics. Nothing to do with this govt.
 

blueazure

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Why would it reduce? Who is going to payback 2 trillion Rs circular debt but ever increasing electricity price? It is pure and simple mathematics. Nothing to do with this govt.


Govt to bring circular debt to zero by Dec ’20
omar ayub


ISLAMABAD: The government is planning to recover Rs300 billion from electricity “defaulters and thieves”, besides providing Rs50bn additional subsidy to exempt consumers using up to 300 units from tariff increase required under the International Monetary Fund programme.



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from 'recovery' of 300bn to grant of 400bn for IPPs


beautiful


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Norwegian

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Govt to bring circular debt to zero by Dec ’20
omar ayub


ISLAMABAD: The government is planning to recover Rs300 billion from electricity “defaulters and thieves”, besides providing Rs50bn additional subsidy to exempt consumers using up to 300 units from tariff increase required under the International Monetary Fund programme.



---------

from 'recovery' of 300bn to grant of 400bn for IPPs


beautiful


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Beauties by your favorite govt:
 

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