Power sector circular debt rises to Rs2.26tr

Published November 3, 2020
The power division’s circular debt has surged to Rs2.26 trillion, an increase of about Rs851 billion since December 2018. — AFP/File
The power division’s circular debt has surged to Rs2.26 trillion, an increase of about Rs851 billion since December 2018. — AFP/File

ISLAMABAD: The power division’s circular debt has surged to Rs2.26 trillion, an increase of about Rs851 billion since December 2018.

Power Division Secretary Ali Raza Bhutta, while briefing the Public Accounts Committee (PAC), explained the reasons due to which the government could not control the circular debt. The circular debt, commonly known as power sector payables, reportedly grew at an average rate of about Rs1.5bn a day (Rs45bn per month) in 2019-20.

Payables to independent power producers (IPPs), which were Rs718bn in December 2018, jumped to Rs1,042bn, according to the statistics presented to the PAC. Likewise, the power holding companies’ outstanding, which was Rs607bn two years ago, rose to Rs1,003bn. Also, the amount payable by Gencos (generation companies) to fuel suppliers increased from Rs89bn to Rs105bn.

Since December 2018, the total circular debt has increased from Rs1,415bn to Rs2,266bn.

60pc increase in less than two years, PAC told

Mr Bhutta said reasons for the rising circular debt were “technical and complex”. According to him, in addition to the “inefficient” power distribution companies (Discos) and technical losses, the subsidies given to the industrial sector, Azad Jammu and Kashmir and areas of the erstwhile Federally Administered Tribal Areas (Fata) and the agriculture sector of Balochistan were also a factor.

He told the PAC that it had been proposed that agriculture subsidy would be divided between the federal and Balochistan governments in 40/60 ratio to cover up the subsidised tariff.

He said some subsidies were budgeted for which the government contributed its share, while “others were not budgeted” and caused increase in the circular debt.

Moreover, the government did not pass on variation in dollar rates to the end-consumers and subsequently this also added to the debt, he said, adding that the Centre also gave 650MW electricity to K-Electric and the delay in payment of the said electricity resulted in amplifying the circular debt.

Mr Bhutta said that since he had assumed the charge of power division secretary only a few days ago, he was not very well versed with detailed facts. However, he said, the government was taking up this issue at the top level and a policy to confine the circular debt had almost been finalised.

The PAC chairman expressed dissatisfaction over the handling of the power sector circular debt. He claimed that the circular debt was only Rs450bn when the previous government completed its term.

Raising the issue of transparency in the power sector’s accounts, MNA Riaz Fatyana said about 50pc posts in power distribution companies were lying vacant. “You are saving these salaries, but you did not expand the infrastructure in accordance with the requirements,” he said, adding that this was the reason that the power sector had failed to achieve the desired results.

The meeting also took up a matter relating to litigation on the PAC proceedings.

Another lawmaker, Ibrahim Khan, pointed out that a private firm, M/s Usman Traders, had filed a defamation suit on the basis of a discussion held in the PAC, which was the apex accountability forum of parliament.

Senator Mushahid Hussain Syed asked the PAC chairman to take up this matter with the judicial authorities.

MNA Syed Naveed Qamar pointed out that under Article 69 of the Constitution, courts could not inquire into proceedings of parliament.

Sub-Article 1 of Article 69 states: “The validity of any proceedings in Parliament shall not be called in question on the ground of any irregularity of procedure.”

Mr Qamar suggested to the panel to ask the National Assembly Secretariat to take up this matter with the relevant judicial authorities.

Published in Dawn, November 3rd, 2020

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