PM asks for formula to retire circular debt

Published April 28, 2021
Prime Minister Imran Khan on Tuesday asked the finance and power ministries to sit together and devise a formula to retire the mammoth Rs900 billion circular debt in the power sector. — AP/File
Prime Minister Imran Khan on Tuesday asked the finance and power ministries to sit together and devise a formula to retire the mammoth Rs900 billion circular debt in the power sector. — AP/File

ISLAMABAD: Prime Minister Imran Khan on Tuesday asked the finance and power ministries to sit together and devise a formula to retire the mammoth Rs900 billion circular debt in the power sector without putting any additional burden on electricity consumers.

Presiding over a cabinet meeting, the prime minister expressed the fear that circular debt might go up to Rs1.5 trillion by 2023.

“The prime minister has asked finance and power ministries to find a way to get rid of the capacity charges issue without increasing electricity tariff,” Information Minister Fawad Chaudhry said at a press conference.

He said that due to inefficient policies of the previous government and production of 40-50 per cent excessive electricity capacity charges of plants had increased from Rs450bn to Rs900bn.

Minister says 11 IPPs are being paid Rs600bn for 3,300MW

“It means that the government has to pay Rs900bn to the power-producing companies whether we use electricity or not. In 2023, which would be election year, the capacity charges would reach Rs1,500bn, causing an increase in electricity rate from Rs11.75 to Rs16.44 per unit. The cost of per unit electricity production is Rs22-23,” he added.

Mr Chaudhry said that had the full cost of electricity production been passed on to the consumers, all the industry would have collapsed because of unaffordable power.

The issue of circular debt could be tackled by shutting down inefficient power production plants, he added. Some have already been closed and the remaining would be shut down by September 2022.

Similarly, the minister said, there were around 11 IPPs (independent power producers) generating around 3,300 megawatts of electricity that was extreme­­ly expensive. “We are giving Rs600bn to these IPPs. The government is in negotiations for purchasing 11 IPPs so that these could also be shut down as per its policy.”

The minister, however, said the power sector’s line losses had come down from 18.3 per cent to 17.8pc despite an increase in electricity tariff, which showed the government’s good performance.

Published in Dawn, April 28th, 2021

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