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Power Crisis: Why the debt keeps piling up?

July 20, 2012

If the circular debt is partly explained by the rising prices of oil internationally, another aspect is the domestic consumer who refuses to pay for the bulbs he lights and the air conditioners he runs.

And like any other business, the power sector cannot survive if the dues it is owed are not recovered.

The ministry of water and power concedes that the electricity distribution companies (discos) have to recover Rs375.73 billion from consumers.

But these consumers are not just errant individuals and tax evading businesses but also the government. This is an oft repeated story but such an important one that it has to be highlighted time and again.

No government, so far, has been able to make any of these institutions or sectors cough up - simply because of politics.

The private sector on the other hand owes Rs166.18 billion - these are mostly large commercial and industrial units that have piled up bills and then gone into litigation against the relevant Disco to avoid paying up.

And then there are powerful individuals. "Consumers who have to pay millions of outstanding electricity bills are well connected and influential," the official said adding that "We cannot even disconnect the supply to their installations - be it home or business."

Pakistan has nine electricity distribution companies and each one of them suffers from transmission and distribution (T&D) losses.

Of these, the losses of some are relatively low - from nine to 20 per cent. This includes Islamabad Electric Supply Company, followed by the three Discos of central Punjab. These are: Gujranwala Electric Power Company (GEPCO); Faisalabad Electric Supply Company; and Lahore Electric Supply Company (LESCO).

But this is the relatively good news.

Outside of upper and central Punjab, the default takes on grave proportions. Sindh and South Punjab are good examples of this.

Sukkur Electric Power Company (SEPCO)'s losses are 39 percent. Ironically, this disco was created as late 2010 to improve the power distribution network.

"There are frequent complaints of teams being held hostage or severely harassed by powerful people who are not paying bills," said an official of Sepco.

Hesco's woes are no different - though from 38 per cent two years ago, its leakages have dropped to 28 per cent. But this is only because its troubled areas were taken away from it and given to SEPCO.

"Hesco has to recover Rs26 billion from the Sindh government and Rs12 billion from private consumers - but political pressure stops us from disconnecting any connection," said an official.

"Recently we disconnected the power supply to Wasa and some other departments over outstanding bills of Rs2.38 billion but half a dozen MNAs and MPAs intervened. The politicians' argument was that their voters would get upset," said one official.

Incidentally, two cheques amounting to Rs300 million and Rs200 million have not been honoured by the banks - but still Sindh Government got the power supply to these banks restored.

Hesco operates in 12 districts from Hyderabad to Shaheed Benezirabad (old Nawabshah).

Similar problems are also faced in parts of Khyber Pakhtunkhwa.

High T&D losses are also experiences by Peshawar Electric Supply Company (PESCO) which supplies power to over 2.0 million consumers in Khyber Pakhtunkhwa; Quetta Electric Supply Company (QESCO) which covers the entire Balochistan Province and Multan Electric Power Company (MEPCO).

An official of ministry of water and power said that "If we look at all the poorly performing Discos - they all operate in remote but politically volatile area where the elites are very strong and powerful," the official said. The better recovery rate is enjoyed by DISCOs that operate in relatively more developed parts of the country.

The ministry of water and power has recommended that this problem can partly be resolved if the federal government deducts the amounts owed by the provincial governments from the federal funds headed to the provincial governments.

"Prior to 2007, we used to get the bills cleared from the federal government grants to provinces but now the provinces are taking years do so," the ministry of water and power official said.