LAHORE: The unpaid bills of the power companies have again swelled to Rs286 billion during the first three quarters of the current financial year in spite of the heavy increase in the electricity prices for domestic, industrial and commercial consumers to fully recover the cost of generation.

The power companies blame poor governance of the power sector for the fresh build-up of the unpaid bills commonly known as circular debt. In its first major policy decision, the government of Prime Minister Nawaz Sharif had paid unpaid bills of Rs480 bn to the power producers and their fuel suppliers immediately after returning to power in June last year.

“The collection of bills by the Discos (distribution companies) has dropped to 76 per cent this year from over 80 per cent last year and line losses (and theft) have also risen,” an executive of a private power company told Dawn on Tuesday. Nor the government had made any progress in the recovery of unpaid bills of more than Rs420bn from the public and private customers (of Discos), he added.

“When the government cleared our bills pending till March last year, it had promised to take effective measures to prevent another build up of the power sector debt. But barring a fat increase in electricity prices for all consumers it has failed to implement other reforms in the power sector, which has resulted in the re-emergence of the debt”, the executive who wanted not to be identified said.

Of the total amount outstanding against the National Transmission and Dispatch Company (NTDC), a sum of Rs150bn is due to power producers operating under the 1994 power policy.

The major sufferers of non-payment of bills by the government are Hubco (Rs60bn) and Kapco (Rs59 bn). Both the companies owe the same amount to their fuel supplier, PSO.

The government also owes Rs39.26bn to the Independent Power Producers (IPPs) established under the 2002 power policy. Nishat Power has Rs4.4 bn, Nishat Chunian Power Rs4.1bn, Atlas Power Rs3.9 bn, Hubco Narowal Rs3.6 bn, Liberty Rs5.2bn and Attock Gen Rs5.1bn outstanding against the NTDC. An amount of over Rs78bn is also payable to the public power generation companies -- Gencos.

The government has set aside Rs150 bn in the budget for the present fiscal for power subsidies. “The government, however, is releasing Rs25bn to the Discos every month as power subsidy. This means that the amount of the power subsidies will double to Rs300bn by the end of the fiscal year,” chief executive officer of another private power company said.

He concluded that the circular debt was estimated to balloon to Rs370 bn, or over three quarters of the same paid off to clear the unpaid bills of power companies accumulated under the previous government, by the end of the year on June 30 if not cleared by the government.

The clearance of the previous debt, the government had claimed, had added 1700 megawatts to the system, helping mitigate power woes of the consumers. But the power producers say the fresh rise in the debt could force many private producers to cut their generation, leading to power cuts of 12-18 hours this summer unless their dues are paid off to enable them to operate their plants at the optimal capacity.