Lahore
The Pakistan Industrial and Traders Association Front (PIAF) has warned of any move to levy circular debt tax or increase in power tariff to pay off this debt, as past trend of increasing tariff to control circular debt has totally failed.
In a joint statement PIAF senior vice chairman Nasir Hameed and vice chairman Javed Siddiqi observed that the monthly accumulation into a monster of circular debt stood at Rs35 billion as it went up to Rs139 billion during the first four months of July-Oct of the current fiscal year 2021-22. The overall stocks of the circular debt (CD) touched heights and climbed to Rs2,419 billion on account of flows and stocks till the end of October 2021.
Nasir Hameed called for taking drastic measures and adopting holistic approach in tackling the problems in the sector to address power consumers’ vulnerability. He projected that the capacity payment is all set to touch new heights in the next fiscal year 2022-23 whereby it may balloon to go beyond Rs one trillion mark. In the wake of arising difficulties the monster of circular debt is going to stay here during the remaining tenure of the government, as the dream of erasing the circular debt on monthly basis could not be achieved as realistically analyzing the ground realities. The accumulation of circular debt went up by Rs 450 billion in 2017-18. However, it continued mounting up as it rose by Rs538 billion in FY 2020 and Rs 130 billion in FY2021.
Nasir Hameed called for power sector reforms, considering the matter of overbilling, technical losses, transmission issues, proposal on decentralization of the sector, promotion of off grid solutions, incentives for renewable energy solutions and capacity payments to the independent power producers. He added that if the government failed to take immediate measures the power sector is likely to choke up due to heavy outstanding dues.
Under the Circular Debt Management Plan envisaged under the IMF’s conditions, the government had made plans to bring down the circular debt to zero on monthly basis before the Covid-19 pandemic. However, there was consensus within the government that the flow of circular debt could not be brought down at zero, but for all practical purposes, it could be curtailed by less than Rs 10 billion per month. For bringing it at zero, the government would have to hike the electricity tariff manifold which is not good for the trade and industry.
According to the data, total payable to power producers stood at Rs 1,420 billion, GENCOs payables to fuel suppliers Rs 91 billion, and amount parked to Power Holding Company Rs 908 billion, totaling the outstanding amount of CD touching Rs 2,419 billion.
Javed Siddiqi said that the overall power sector reforms can be included closing down of inefficient IPPs, re-negotiations with the IPPs, bringing reforms in govt-owned power producing plants, improving efficiency and reducing costs of Wapda plants, besides converting the agriculture tube wells in Balochistan to solar in collaboration with the provincial government to reduce the cost.
We have to resolve the circular debt issue by revamping the entire power sector, including tariff setting, efficiencies of power generating units, supply chain network and payment recoveries. If this is not done, the future of energy sector would remain at stake, PIAF vice chairman warned.
