Govt confirms circular debt at Rs1.8tr

Updated February 15, 2020

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Power Division said “Circular Debt at the beginning of September 2018 when the PTI government took office was Rs1.33tr”. — AFP/File
Power Division said “Circular Debt at the beginning of September 2018 when the PTI government took office was Rs1.33tr”. — AFP/File

ISLAMABAD: The government on Friday confirmed that overall liabilities of the power sector – commonly known as circular debt – stood at Rs1.782 trillion by December 2019, up 34 per cent since September 2018 when it came to power.

In a written statement sent out to the media on Friday, the Power Division said “Circular Debt at the beginning of September 2018 when the PTI government took office was Rs1.33trn” and was increasing at a rate of Rs38bn a month.

It said the total circular debt as per the definition by December 2019 stood at Rs978bn owed to both public and private power generators, while the liabilities of Power Holding Private Ltd (PHPL) – payable to banks for loans taken in the past to pay generators stood at Rs804bn.

The total liabilities, therefore, amounted to Rs1.782tr at end-December. The total increase was therefore worked out at about Rs452bn.

The ministry said the measures taken by the government as part of the circular debt capping plan had considerably reduced the rate of increase to approximately Rs12-15bn per month – compared to Rs38bn a month before the PTI came to power.

The measures for circular debt reduction included tariff rationalisation, recovery drives, anti-theft campaign and system modernisation, the Power Division said. Due to these measures, the addition to circular debt was expected to be reduced to Rs130bn in 2019-20 as per the Circular Debt capping plan, it added.

The Power Division said it was for the first time in the history of power sector that the entire chain had been mobilised totally to fight against losses, theft and corruption. “This is not a weekly campaign but has been sustained for more than a year”, the ministry said hoping the reduction in losses and theft coupled with action against corrupt elements as well as improvement in infrastructure would lead to better service delivery to the common man.

In report finalised at the end-December 2019, the Power Division had found the net power sector receivables to have increased by about 27pc over the last 18 months. The net receivables of all the distribution companies (Discos) increased to Rs1.037tr as of Dec 31, 2019 from Rs817.5bn as of June 2018, showing an increase of 27pc or about Rs220bn. Total private sector receivables during the period also increased by 24pc to Rs830bn from Rs670bn, an increase of Rs160bn.

The data showed that receivables increased by 137pc from the federal government that was driving the power sector efficiency and recovery drive. This was the highest increase in receivables from any sector. The data showed that Disco’s receivables from the federal government stood at Rs7.2 as of June 30, 2018 but increased to Rs17.1bn by end of December 2019.

The power sector receivables from the AJK government also increased by 28pc to Rs127bn by end-December 2019 when compared to Rs99bn at end-June 2018. Likewise, a 54pc increase was witnessed in the receivables from the provincial governments to Rs62.3bn last month when compared to Rs40.4bn in June 2018.

As such, the receivables from entire public sector consumers increased by almost 41pc to Rs206.2bn as of Dec 31, 2019 when compared to Rs146.84bn in June 2018. As if that was not enough, the receivables on account of government subsidies also increased by 25pc to Rs121.5bn from Rs98bn. The receivables from running defaulters also increased by about 30pc to Rs525bn when compared to Rs405bn 18 months ago.

On the other hand, the total recoveries against total billing during July-December 2019 declined by almost 1pc when compared with same period last year. The data showed total recoveries amounted 92.49pc in July-December 2019 against 93.47pc of same period 2018. The recovery against billing of seven out of 10 Discos dropped during the first half of the current year and only Gujranwala, Islamabad and Peshawar Electric power companies showed improvement.

An amount of about Rs76bn against total billing of Rs923bn could not be recovered during the last first half of the current year. Total bill collection during this period amounted to Rs847bn.

As if that was not enough, the total billing for July-December 2019 increased by almost 24pc to Rs923bn when compared to Rs744bn of same period of previous year. On the other hand, total collection during July-December 2019 amounted to Rs847bn when compared to Rs677bn of same period last fiscal year, an increase of 25pc.

On the positive side, the aggregate technical and commercial (ATC) losses of the power sector declined by about 1.13 to 23.23pc in first half of the current fiscal year when compared to 24.36pc of the same period last fiscal. The ATC losses in the private sector, on the other hand, increased by 0.39pc to 22.68pc in first half of current fiscal year against 22.29pc of same period last year.

The transmission losses in first six months of the current fiscal year slightly came down to 1.5pc from 1.79pc a year ago. The overall technical and distribution losses on the other hand also dropped by almost 2.13 percentage points to 16.39pc in July-December 2019 when compared to 18.52pc a year ago.

Published in Dawn, February 15th, 2020