ISLAMABAD, March 14: The ministry of finance has released Rs6 billion to the Pakistan Electric Power Company (Pepco) in a bid to ease the effects of the circular debt in energy sector that has gone up to Rs180 billion.

Sources told Dawn on Saturday that the amount would be transferred to the Pakistan State Oil, the country’s leading fuel supplier and also the major sufferer of the debt burden.

They said the PSO urgently needed the cash to open letters of credit for purchasing fuel, because banks were reluctant to support it. But even after getting and utilising Rs6 billion, the PSO would owe as much as Rs87 billion to state-controlled power generation entities.

The size of the circular debt increased to Rs180 billion by the end of February from Rs159 billion in January this year. The government has assured the International Monetary Fund that it will retire the debt by June this year.

The sources said that foreign banks were “increasingly reluctant” to provide guarantees to the government’s proposed Rs98-billion term finance certificates (TFCs) for generating money and helping Pepco retire its circular debt. Although local banks were willing to help the government to float TFCs in the market, the target could not be achieved without the help of foreign banks, they added.

The government had decided to issue TFCs by the end of February to retire half the debt immediately, but a delay in this respect is leading to an increase in the amount owed.

Officials said the PSO had to recover Rs80 billion from government-run power generation entities and receive Rs7 billion in the form of price differential claims from the authorities.

PSO’s major clients are public sector companies, including the Water and Power Development Authority and Pepco.
According to figures for February 28, the PSO is to receive Rs8.354 billion from Pepco, Rs44.3 billion from Hub Power Company Ltd, Rs21.210 billion from Kot Addu Power Company Ltd and Rs3.302 billion from the Pakistan International Airlines.

The PSO is to pay Rs40.072 billion to Pak-Arab Refinery Ltd, Rs8.7 billion to National Refinery Ltd, Rs13.2 billion to Attock Refinery Ltd and Rs900 million to Bosicor.

The sources said the PSO was likely to pay Rs6 billion it had received from the government to Parco which was facing problems for opening LCs.

Meanwhile, SNGPL and SSGC are finding it difficult to pay dues to gas production companies because power production companies (their clients) are unable to retire the debt of the two gas utilities.

SNGPL and SSGC have requested the ministry of petroleum and natural resources to help them recover the dues from the power generation companies.

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