THE government appears to have lost the initiative in its pledge to eliminate the circular debt. The amount of debt has once again soared past historic highs, surpassing Rs577bn by latest figures, and the receivables of PSO, the state-owned oil company that bears the brunt of the power sector’s inability to pay its fuel bills, have also touched the historic high of Rs238bn.

The company is reportedly running multiple defaults on its domestic and international obligations in order to carry this mammoth bill.

All players in the power supply chain — the fuel supplier, the IPPs, the public-sector power plants — are back to square one since this government undertook a massive retirement of the circular debt in its earliest days. That amount was also a record-breaking Rs480bn, much of it raised from borrowing, and the payout was accompanied by promises that the problem of the circular debt would not be allowed to reappear.

Also read: Circular debt a major challenge to Thar power project

The government was serious this time, we were told. This time there would be reforms, efficiencies would be raised and recoveries improved.

Not many objections were raised because everybody wanted to give the government a chance to deliver on its commitments first, and few saw any alternative given the massive load-shedding that had engulfed large parts of the country. But today, the opportunity presented by that moment, which briefly breathed some life into our power plants, has been squandered.

From here on, the government is left to muddle through, to manage the power crisis on a day-to-day basis just like the previous government did. It is still not too late to undertake the right policy actions to rectify the situation, but it is more difficult now than it was the same time last year.

Tackling the power crisis was the main plank in this government’s election campaign, and this is the one area upon which their fortunes hang. Comprehensive action must begin now, otherwise the cost of delays will only rise.

Published in Dawn, November 21th, 2014