Circular debt rose to Rs2.306tr in November 2020

[muhammadhafeezmalik]

Government promissed in May, 2019 that it will bring circular debt to zero instead it doubled the CB.

Circular debt rose to Rs2.306tr in November

The government confirmed on Thursday that power sector’s circular debt went past Rs2.306 trillion as of Nov 30, 2020, up by Rs156 billion over the first five months of the current fiscal year, at a rate of Rs31.2bn per month.


With this on the table, a meeting of the Cabinet Committee on Energy (CCoE) presided over by Planning and Development Minister Asad Umar was also informed by the Ministry of Information Technology that a meterless smart metering system successfully tested and proved on ground was not being adopted by power distribution companies.


The meeting was told that a bulk share of the increase in circular debt was poor governance in the public sector itself. It was noted that Rs156bn addition in circular debt included non-payment of budgeted and unbudgeted subsidy, delayed payments on account of interest to independent power producers (IPPs), other mark-ups, pending price adjustment on account of quarterly and monthly adjustments and non-payments by K-Electric.


The meeting was informed that on the basis of existing tariff notifications, a total of Rs317bn subsidy was required, but the Ministry of Finance had budgeted only Rs144bn, leaving an unbudgeted subsidy gap of Rs177bn.

Cabinet body told that poor governance in public sector mostly responsible for surge

The Power Division reported that about Rs31bn debt flowed from operations of the distribution companies, Rs65bn on account of unpaid subsidies, Rs34bn higher interest due to non-payments of dues to the IPPs, Rs33bn mark-up on Power Holding Company, Rs103bn in pending generation cost and Rs34bn non-payments by K-Electric. As such total circular debt actually increased by Rs300bn, but prior-year adjustments of Rs145bn in consumer tariff reduced the circular debt build-up to Rs156bn in five months.


The Power Division said that a circular debt management plan was being implemented to minimise its build-up. It said the total circular debt increased by Rs538bn during the fiscal year 2019-20 at a rate of about Rs45 per month. During the July-November 2019-20 period, circular debt increased by Rs179bn at a rate of Rs36 per month, while it slightly reduced to Rs156bn during July-November 2020-21 at a rate of Rs31.2bn per month.


The IT ministry put on record that it had been repeatedly asking the Power Division since November 2018 to adopt Electrocure — a meterless smart metering system orientation developed by Ignite (a government company) — for “reducing chronic issue of line losses, power supply and identifying electricity theft”.


The equipment was put to use and “successfully implemented in Military Engineering Services (MES) Rawalpindi and Peshawar Electric Supply Company (Pesco)”.


A reduction in technical loses of up to 15 million per month was achieved at MES, helping the GHQ in the planning of solar plant installation through feeder monitoring system reducing 30-40pc extra plant capacity costs.


Also at Pesco, initial statistics from Karkhano and Ring Road feeders on average one million watt hours per 10 transformers per day had been diagnosed. On average 20 meters have been replaced with a single Electrocure unit, bringing smart metering price per consumer to $15 (smart metering cost internationally is more than $200 with turnkey solution).


The meeting directed the Power Division and IT ministry to hold further deliberations on the proposed metering design and submit a joint proposal to the CCoE, according to an official statement.


The Petroleum Division proposed setting up of a committee comprising the secretary of petroleum, provincial secretaries of energy and industries and a senior official of Sui Southern Gas Company for streamlining the process for industrial gas connections in Balochistan. The meeting approved the committee and directed that its recommendations be submitted to the CCoE within one month.


The meeting was attended by Finance Minister Abdul Hafeez Sheikh, Special Assistant to the Prime Minister on Petroleum Nadeem Babar, Adviser to the Prime Minister on Commerce and Industries Abdul Razak Dawood and officials from various divisions.


Published in Dawn, January 8th, 2021

Circular debt rose to Rs2.306tr in November

Poor governance in public sector primarily responsible for surge, cabinet body told.

www.dawn.com

 

[blueazure]

why is circular debt rising ?

@Norwegian

 

[Bouncer]

The meeting directed the Power Division and IT ministry to hold further deliberations on the proposed metering design and submit a joint proposal to the CCoE, according to an official statement.

Story of Sarkar. Always ends with "commission formed", "xyz was directed", "hold further deliberations". Pull off this kind of shit in even a medium level private company you get your *** out of the door within the hour with your salary withheld. It can happen only in sarkari enterprises that trillions of Rs are lost but sarkari naukri and pensions remain intact. Privatize the entire chain, please for God's sake have some mercy on tax paying middle class. We cannot keep feeding these assholes and their generations.

 

[muhammadhafeezmalik]

why is circular debt rising ?

@Norwegian

Why did government give us false assurance that Circular Debt will be finished in Dec, 2020??

 

[Patriot forever]

Why did government give us false assurance that Circular Debt will be finished in Dec, 2020??

The rate of primary increment has decreased, the interest however will keep on adding ( consider it a debt trap).
They thought that it would be easy to renegotiate with the power companies, oh boy they were so wrong. It is not easy to get rid or renegotiate contracts when the guarantor of contract is state itself

 

[AZ1]

Thank you nawaz sharif for making such contracts that even after 10 years we wouldnt be able to control it vizionn

 

[Syed1.]

Thank you Nawaj Chayreef.... Kuttay ki nasal.

 

[Norwegian]

why is circular debt rising ?

@Norwegian

Energy contracts in Dollars by previous govts, low recoveries, inefficient power sector.

 

[ejaz007]

NA panel briefed: Rs450bn being added to circular debt annually
Zaheer Abbasi 13 Feb 2021

Facebook

Twitter

Whatsapp

Comments

ISLAMABAD: The government said on Friday that annual Rs450 billion was being added to the circular debt on account of over and above the losses allowed by the National Electric Power Regulatory Authority (Nepra) and capacity payment of unutilised electricity as members of a parliamentary panel said that the power sector problems were increasingly becoming problematic for the economy.

A meeting of the Finance Committee of the National Assembly presided over by Faiz Ullah on Friday was briefed by senior officials of the Finance Ministry about circular debt and its financial implication and stated that Rs225 billion was being added to the circular debt on account of 15 percent losses – less recoveries and more than allowed transmission and distribution losses by the Nepra and an equal amount Rs225 billion was being added on account of capacity payment.

The Finance Ministry was unable to explain the reasons for acceleration in circular debt, despite a massive increase in power tariff during the last two and half years and stated a circular debt management plan (CDMP) has been designed with the World Bank to control the flow of circular debt, rising Rs45 billion on a monthly basis.

The plan envisages improvement in operational efficiencies, providing targeted subsidies.

The meeting was informed that annual breakup of circular debt included 60 percent purchase, 20 percent losses, and 20 percent late payment surcharge (LPS).

The committee was further informed that the government has taken into its own account Rs1,006 billion circular debt stock parked in the PHPL and would pay Rs72 billion as interest cost of it in the current fiscal year.

The government has already made payment of Rs28 billion out of Rs72 billion payable on account of interest and the remaining Rs46 billion would be cleared before the end of the fiscal year.

The secretary Finance Ministry stated that circular debt was of two types debt stock and flow and circular debt build-up because actual cost of the power in not reflected in bills and there is very low recovery in some provinces.

Line losses and obsolete distribution network and capacity payment are other factors for a surge in circular debt.

The government has decided to settle the payable circular debt of over Rs1,300 billion by taking certain measures such as engaging the IPPs for voluntary reduction in tariff and settlement of Rs403 billion in two tranches i.e. 40 percent in next couple of weeks and 60 percent in August.

He said that payment of first installment would be made when circular tariff will be reduced by Re1 per unit to Rs1.5 per unit subsequent to operation and maintenance expenditure reduction by 11 percent whose impact would be on tariff by Re1 to Rs1.5 per unit.

The committee members expressed their grave concerns about the policies adopted by the government to arrest the rise in circular debt.

The Committee members were of the view that an increase in circular debt will create huge problems for the economy, especially towards the smooth functioning of the industries.

After detailed discussion, the Committee unanimously decided that the Power Division may be invited in the next meeting of the Committee for further deliberations in this regard.

Muhammad Ali Malik, director, State Bank of Pakistan (SBP) while briefing the committee about the foreign exchange reserves and expected pressure especially when the IMF programme was not resumed, stated the $2.2 billion payment would be due in the current fiscal year.

However, he said that the government was expecting inflow more than the due payment from the IMF, from multilaterals for project loans as well as other initiatives besides some borrowing by the government.
He also said that when the economy would open up and travel would resume, the remittances may face a slight decline.

He said that $4.6 billion maturity would be in a year’s time and some of them would be due in next three months, whereas, Chinese swap liabilities stood at $4.6 billion.

He agreed with the members that despite an increase in foreign exchange reserves by Rs6 billion and improvement in buffer by $9.6 billion, there is a long way to go to overcome the challenge but argued that things are on the right path as $480 million have been received in Roshan digital accounts so far.
The Committee members have expressed their apprehensions with regard to expecting pressure on foreign reserves due to upcoming repayment schedules, in case the suspension of the IMF Program. However, the director SBP responded that Chinese debt repayments can be rollover.
Copyright Business Recorder, 2021

https://www.brecorder.com/news/4006...rs450bn-being-added-to-circular-debt-annually