ISLAMABAD: The power sector receivables at Rs591 billion are reported to be ‘grossly overstated’ to build the case for repeated increases in consumer tariff, government subsidies and bank borrowing.

This has been reported to the federal government in a latest update on power sector’s circular debt position as of Dec 31, 2014, according to a senior official dealing with the issue. The report said the power sector’s payables of around Rs300 billion were also understated.

The critical problem, said the official, originated from the accounting anomalies. He said the power companies ‘booked’ their payables after 60 days when they become legally due for payment but ‘showed’ their receivables on the day they issue bills, resulting in big financial gap. Likewise, some big invoices were put in the disputed or suspense category and were not properly booked.

He said the report had been shared with the Ministry of Water and Power and Ministry of Finance for an in-depth study and audit, indicating that almost Rs415bn receivables may need to be written off the books before public sector entities could be offered to prospective investors for divestment.

The official said the chartered accountants of the distribution companies had also been pointing out these huge fiscal holes in the power sector.

The report said the Pakistan Electric Power Company (Pepco) had pitched its end-December 2014 receivables at Rs590.62bn, but actual recoverable amount had been authenticated at a meagre Rs175.16bn.

The report, seen by Dawn, said Pepco had reported receivables from Azad Jammu and Kashmir (AJK) at Rs47.15bn which was not true representation of claims against the AJK government.

The official explained that under an agreement with the AJK government about a decade ago, the AJK administration was required to pay Rs5.42 per unit while the distribution companies were billing AJK at Rs13 per unit.

The AJK is not liable to pay the differential under the agreement and the Discos have neither been claiming this amount from the federal government, nor the centre showed any inclination to pay this. “So, the Rs47.15bn is non-recoverable,” said the official.

But the most interesting case is that of Rs346.57bn being shown as receivables from the private sector, which is again not true, the official said. He said about Rs250bn in private sector receivables were not only non-recoverable but questionable too in the first place.

He explained that about Rs200bn of the amount was older than a year while another Rs50bn were six month old bills. He said the billing rules required the distribution companies to disconnect power supply after 45 days of non-payment of bills, but the disconnections were negligible.

In fact, this was fake billing that had been accumulated over the period of time and nothing could be recovered. Therefore, repeated involvement of Federal Investigation Agency and National Accountability Bureau for the recovery had shown negligible results.

Likewise, an amount of Rs18.60 billion has been shown in receivables against consumers in Khyber Pakhtunkhwa because of court cases which could not be passed on to the consumers, but had been shown in books and being passed on to the federal government for ultimate transfer to the consumer tariff.

Similarly, a Rs66.15bn claim against Sindh was also questionable and non-recoverable in view of a counter claim of Sindh government to have paid over Rs10bn more than actual consumption. A power ministry official said about 70pc of the bills had been reconciled with Sindh government while remaining 30pc were yet to be examined.

Another Rs42.13bn claimed against Federally Administered Tribal Areas were also described as “not true”. Another Rs5.6bn against the Punjab government on account of 12.5pc of its subsidy share in agricultural tubewells announced by the PPP government had never been accepted by Shahbaz Sharif led government and hence not recoverable. Another Rs4.44bn as 42pc share of Balochistan government subsidy on tubewells had also been challenged.

The report put total payables at Rs298.10bn as of December 31, 2014 without any detailed comments except “understated”. These included to independent power producers (IPPs) at Rs192.17bn, followed by Rs81.44bn to oil companies, Rs23bn to Wapda Hydro, NTDC and some others. The payables to PSO alone were in excess Rs182bn.

The report also pointed out a gradual increase in receivables since 2004 when these were put at Rs70bn. More interestingly, the report said the receibables at the end of fiscal year 2012-13 stood increased at Rs411bn, further went up to Rs512.9bn at the end of 2013-14 and Rs590.6bn at end Dec 31, 2014. This was despite the fact that the government picked Rs480bn circular debt in June and July 2013 including Rs342bn through cash payments and Rs138bn in non-cash adjustments.

Published in Dawn, March 5th, 2015

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