WITH the approval of a plan to float Rs200bn worth of Sukuk bonds to partially settle some claims of the circular debt, the government has chosen to walk down an oft-tried road. Since the first floatation of Term Finance Certificates in 2009 for the same purpose, this will be the fourth major retirement of the outstanding amounts in the power sector in a decade. Along the way, there have been other such retirement exercises or liquidity injections, but none have succeeded in dealing with the problem in a sustainable manner. The largest such exercise was undertaken in 2013, when the PML-N government was sworn in, while making promises that the circular debt would not be allowed to return. Yet today, it is higher than it ever was, standing Rs1.4tr, and threatening to choke the power sector all over again.

Retiring at least a portion of these outstanding amounts from government funds is probably the only option available today, as it was in the years past. But simply retiring the amount without bringing about any deep-rooted changes in the billing and recovery systems of the power sector, as well as reforming the pricing and governance regime will be a fruitless exercise. That is how we have run this circle for decades. Sadly, accompanying the announcement of the plan for Sukuk bonds, there was also the announcement that the power division had backed away from its commitments to bring about improvements in system efficiency. As of now, more than six months into its term, the government has advanced no vision and no big ideas about how it intends to reform the power sector to improve its liquidity position and streamline its governance. So the Sukuk bond looks like nothing but a temporary measure at the moment. The amount is not large enough to make a meaningful dent in the problem, yet is big enough to impact public indebtedness. The time to bring forward a vision for reform of the power sector has long arrived.

Published in Dawn, January 31st, 2019