LAHORE: The unpaid bills of both private and public power companies have again soared to a staggering Rs156 billion in less than 10 weeks after the government had paid their previous bills for the pre-June period. The sum includes the unpaid bills of private power producers amounting to Rs54bn.

The government paid Rs380bn to the private power producers to clear their bills just before the close of last fiscal year while the bills exceeding Rs135bn of the public sector companies were ‘adjusted’ in July.

Power producers blame the Nawaz Sharif government’s failure to timely raise electricity prices, check power theft -- which is about six per cent of the total production -- reduce transmission and distribution losses and recover the bills from consumers for the early rise in the unpaid bills of the power companies.

Though the government has increased power prices for industrial, commercial and bulk consumers from August, it plans to raise the domestic tariffs from October. But the increase in the prices alone is not going to work and stop unpaid bills of power producers from piling up.

“The increase in electricity prices will provide the government some relief, but the challenge of stopping theft and increasing the recovery of the bills from the consumer in the public and private sector remains a major challenge, which could cause the unpaid bills of power companies to rise to alarming level,” a financial analyst at a brokerage house told Dawn on Friday.

Private power producers say on the condition of anonymity that the clearance of their previous bills by the government was the right step but had wrongly been touted as ‘full and final resolution’ of the chronic power crisis facing the country.

“It was only an attempt to keep the power sector afloat. Unless the government increases prices for the consumers, recovers the bills, checks theft and cuts transmission and distribution losses (of 22-24 per cent of total electricity produced in the country), you cannot expect the power sector to stand back on its feet and invest in fresh generation,” an executive of a power company argued on the condition of anonymity.

Sources in the industry say the government has to pay Rs54bn to such independent power producers -- whose owners had advised and helped the PML-N leadership in the formulation of the new energy policy -- which have to procure fuel from their own sources under their power purchase agreements with the government. Most of them also have to pay the long-term debt instalments by the end of this month.

“If our outstanding bills are not cleared before the end of this month we will be compelled to cut our production, which will increase the duration of blackouts,” warned the private power company executive.

The remaining unpaid bills of Rs102bn are payable within the government entities. The private power producers are more interested in the early payment of their own bills, saying ‘non-payment to the public companies will not affect generation of electricity, but if their bills were not cleared generation may suffer badly’.

IPPs say the government (or the power purchaser, NTDC) has to pay their bills 30 days after the purchase of power from them. “An MoU was signed in this regard and the government has written to Nepra. IPPs have also submitted their proposal to Nepra for approval of the additional cost of working capital, which will help the government save interest cost (from Kibor plus 4.5 per cent to Kibor plus 2pc) if the additional cost of working capital is approved,” the executive claimed.

With annual power consumption hovering around 70 billion units, the delay in power prices raises is causing an additional burden of around Rs25-30bn a month on the government.