Energy sector circular debt touches record Rs922bn

[koolio]

ISLAMABAD: Pakistan’ energy sector’s circular debt is estimated to have gone beyond a record Rs922 billion mark by end of November 2017.

According to a report submitted to the parliament this week, the Ministry of Finance has put the amount of circular debt at Rs472.678bn as of November 30, 2017.

The report, however, did not explain that another Rs450bn debt was separately parked with Power Holding Private Limited (PHPL) — a subsidiary of the power division — created to raise funds from commercial banks and is financed through surcharges built into the consumer tariff.

Minister of State for Finance Rana Muhammad Afzal Khan reported that the amount of the said circular debt (Rs472.678bn) of the sector payable to power generators, short term in nature, did not appear in annual State Bank report of 2016-17. The report only indicated long-term loans payable by economic groups of domestic and foreign financial institution

The finance ministry’s report put the payables to oil and gas sector at Rs103bn, including Rs89.4bn to Pakistan State Oil (PSO). The dues to oil and gas companies had stood at Rs71bn in December 2013.

This is despite the fact the PSO had reported Rs285bn receivables from the power sector earlier this month. This also meant that the federal government’s capping plan three years ago to trim down the circular debt to Rs204bn by mid-2018 was falling apart.

The ministry reported payables to Hub Power Company at Rs70bn in November this year, slightly lower than Rs75bn in 2013. By contrast, the dues to Kot Addu Power Company surged to Rs73bn in November FY18 against Rs41bn in 2013. Likewise, the bills to AES also increased to Rs19bn compared to Rs11bn four years ago.

Including these major companies, total payables to all the independent power producers were reported at Rs288bn this year versus Rs270bn in 2013. Payables to Wapda hydro and others were reported by MoF at Rs52bn this year in contrast to Rs138bn four years ago.

As such, the total fresh flow of circular debt has now reached Rs472bn as of November 30, 2017 after clearance of Rs480bn in 2013, soon after the PML-N came into power.

The finance ministry reported servicing of PHPL debt at Rs17.558bn but did not report the total stock of debt on PHPL books that now stands at about Rs450bn compared to Rs335bn in 2013.

Power Minister Sardar Awais Ahmad Khan Leghari recently conceded that the power sector losses which amounted to about Rs120bn were now estimated at Rs360bn per annum as transmission and distribution losses dropped only 1.2 per cent in four years while the supply increased significantly.

This was despite the fact that the power division had reported to the cabinet committee on energy in August 2017 that overall recoveries had improved to 93pc compared to 88-89pc in 2014. A series of surcharges were imposed over the last four years and oil prices witnessed a historic fall.

The additional costs to consumers included about Rs4.50 per unit through a series of surcharges, like tariff rationalisation and financing cost etc, and about Rs1.50 per unit by withholding notifications on tariffs determined by the regulator 2015-16 onwards.

Source Dawn https://www.dawn.com/news/1392681/energy-sector-circular-debt-touches-record-rs922bn

 

[VCheng]

The report, however, did not explain that another Rs450bn debt was separately parked with Power Holding Private Limited (PHPL) — a subsidiary of the power division — created to raise funds from commercial banks and is financed through surcharges built into the consumer tariff.

Let's make another holding company, and park this new amount there. Problem solved, just like before.

 

[Nothing]

Is government hiding actual figures behind technicality or it is a pure lie? How come those figures were not part of any report? Who is responsible for holding the company and from which revenue stream holding company will ever able to clear all debt? Either government is lost and has no control over its day to day job or it is just trying to win another election but creation facade of feel-good factor.

 

[ziaulislam]

Is government hiding actual figures behind technicality or it is a pure lie? How come those figures were not part of any report? Who is responsible for holding the company and from which revenue stream holding company will ever able to clear all debt? Either government is lost and has no control over its day to day job or it is just trying to win another election but creation facade of feel-good factor.

nope the 422 billion ruppes is of the previous govt which govt put in holding company..
its shown in govt liabilities, nothing special PIA has 450 billion liabilities for example

 

[Nothing]

nope the 422 billion ruppes is of the previous govt which govt put in holding company..
its shown in govt liabilities, nothing special PIA has 450 billion liabilities for example

So basically this government did nothing to improve it. are that debt is national debt or any component is international debt or with sovereign guarantees?

 

[ziaulislam]

So basically this government did nothing to improve it. are that debt is national debt or any component is international debt or with sovereign guarantees?

its simply a debt, what the big deal about it..every govt has debt..its about 2.5-3% of GDP, one of reason govt kept in holding company is debt ceiling limit by parliament is 60%, govt kept this, PIA, steel mills, DECOs etc separate(around 7-8%) of GDP to keep borrowing

we have named it as such, to indicate what it is, its 10 year accumulation of power sector loses, when current govt came in it stood at around 420 billion in 5 years its grew by another 500 billion, things are getting better as cheaper coal and hydro plant comes on line, the growth has been slower... infact half of the speed(to number of units produced), i expect it to stay around 1 trillion mark as lately alot of coal plants came on line dropping the price

 

[VCheng]

So basically this government did nothing to improve it. are that debt is national debt or any component is international debt or with sovereign guarantees?

The problem with such circular debt is that it shows the total failure of management of the power sector. If producers cannot be paid in a reliable and timely manner by the consumers (including the government and the military) for the power they produce, how does adding more capacity solve anything except making the debt even larger?

 

[ziaulislam]

The problem with such circular debt is that it shows the total failure of management of the power sector. If producers cannot be paid in a reliable and timely manner by the consumers (including the government and the military) for the power they produce, how does adding more capacity solve anything except making the debt even larger?

power losess/stealing/lack of payment by govt sector..its stand at 100 billion per year, i dont think its big deal but i also dont see the logic of its piling up, NEPRA and govt need to come up with a plan to settle this, NEPRA refuses to put this on paying customers and govt doesn't want to pay it off either

solution will be privatization but you cant privatize distributions when we have such a glaring issue

i think govt needs to pressurize nepra to give less stringent bench mark for power losses

 

[BATMAN]

All state sectors shall be run by retired army generals.
Civilians are institutionally corrupt.