ISLAMABAD: The power division conceded on Thursday its earlier path to circular debt reduction was unrealistic, as the previous projection for the ongoing fiscal year was underestimated by Rs450 billion and required higher tariff increases than anticipated.

Based on revised estimates, the Cabinet Committee on Energy (CCoE) approved a revised circular debt management plan (CDMP) that would need about Rs2.17 per unit increase in base uniform national electricity tariff in July 2022.

This will be in addition to about 65 paisa per unit increase in base tariff by the end of current month for which the National Electric Power Regulatory Authority has already completed a public hearing.

The revised three-year CDMP “targets to minimise the annual build-up of circular debt as well as reduction in the stock”, said a statement issued by the planning division after the CCoE meeting presided over by Planning Minister Asad Umar.

The meeting was attended by ministers for Finance, Energy and Industries and other ministry officials.

“During the meeting, the CCOE reviewed the current situation and projections of the power sector circular debt while approving the CDMP,” the statement said.

The power division said the circular debt management plan was previously approved in May 2021 and the flow to the debt was reduced to Rs130bn in the fiscal year 2020-21 against Rs538bn a year ago.

It said the March 2021 CDMP was based on the prevailing market conditions, including quarterly adjustments and the rebasing of tariff, exchange rate, inflation, applicable fuel prices and estimated commercial operations of new plants. “Aligning the CDMP with the latest forecast is a continuous process for accurate monitoring”, it said.

Based on the latest factors, the estimates have resulted in a divergence of Rs448bn in the circular debt flow for the 2021-22 fiscal year. The power division has updated CDMP with revised circular debt stocks projection of Rs1.89 trillion by the end of the ongoing fiscal year and Rs1.526tr by the end of the upcoming year. In the previous CDMP, the stock was projected to be Rs1.442tr and Rs1.123tr, respectively.

The circular debt flow before stock payments for the current and coming fiscal years is projected at Rs167bn and Rs96bn, respectively, the power division noted.

The CCOE also noted the monthly report of merit order violations in the power plants dispatch due to transmission constraints and other technical reasons.

Furthermore, the CCOE also approved recommendation of introducing a special tariff category for Urban Mass Transit projects in the Schedule of Tariff that will be applicable to Karachi Circular Railway and other urban mass transit projects.

Published in Dawn, February 11th, 2022