Rs977 billion circular debt makes power sector unsustainable

ISLAMABAD: In Pakistan’s history, for the first time the circular debt in the power sector alone has swelled to a staggering figure of Rs977 billion --Rs23 billion short of Rs1 trillion. The current payables stand at Rs542.9 bn and the loans borrowed by the power sector parked in PHPL (Power Holding Private Limited) at Rs434 billion, making the sector extremely unsustainable.

“So much so the power consumers have paid the stunning cost of Rs19.2 billion as interest rate on the loan borrowed by the power sector,” reveals the latest official documents on the power sector. The power joint secretary also confirmed the figure of the circular debt of Rs977 billion saying that the government is all set to borrow more loans of Rs80 billion from commercial banks to lay off some arrears of IPPs and some of the Pakistan State Oil.

However, the sources said that the loss in the head of recovery of billed amount of electricity has also increased by 11 percent, and if the recovery situation remains the same and the system is not purged from the inefficiencies, then the day is not far away when the circular debt will cross the figure of Rs1,000 billion (Rs1 trillion.)

And if the loans parked in PHPL are added to the amount of Rs542.9 billion that the government is needed to pay to other entities, then the monster of circular debt of the power sector stands at Rs 977 billion. The latest documents The News divulges that the Power Sector is needed to pay Rs343.2 billion to the Independent Power Producers (IPPs). In 2013, the arrears of IPPs were at Rs74.9 billion which has now swelled to staggering Rs343.2 billion.

Mentioning about the receivables, the document unfolds that CPPA is yet to get the amount of Rs91.9 billion from AJK government, Rs24.6 billion from Fata, Rs214.3 billion from Agriculture tube-wells of Balochistan, and Rs65.3 billion from Karachi Electric (KE).

Because of inefficiencies, the Power Sector also braved the financial gap of Rs49.83 billion just in the month of December 2017 and in the month of January 2018, it also faced the huge hit of Rs22.69 billion.

In the wake of highest circular debt, the liquidity issue in the Power Sector has emerged as threat to the sustainable Power Sector despite the substantial improvement in electricity supply side.

The losses in the head of recovery of electricity bills have inflated to Rs132 billion a year as the recovery has plunged to 89 percent. “The total annual turnover of the Power Sector hovers in the range of Rs1.2 to 1.5 trillion and if kept in view the said turnover in mind, then one percent loss amounts to Rs12 billion and the damage in recovery loss stands at Rs132 billion.

According to the senior officials at Power Division, the electric power distribution companies (Discos) after recovery of billed amount of electricity first spend the amount on their expenses then they pay the remaining amount to CPPA (Central Power Purchase Agency). Almost all the Discos pay Rs2.5 billion to CPPA every day, but one day in December 2017, they had paid just Rs112 million owing to which the government had to arrange the loan to run the power sector the next day.

Minister for Power Mr Sardar Awais Laghari in his recent statement has already acknowledged the bitter fact that the country will have to bear huge Power Sector loss of Rs360 billion this year mainly because of insignificant reduction in system losses from 19 percent in 2013 to 17.8 percent in 2018.

Though Nepra has increased the permissible losses in tariff up to 16.2 percent meaning by that the end consumers annually pay Rs194.4 billion in the head of system losses and theft even then the power sector is sustaining the loss of Rs360 billion showing that the power sector is still in the hands of inefficient people.

The Nepra official said that addition of power generation is good, but not enough to end the loadshedding as it is the 100 percent recovery of the generation cost of electricity which will make the sector sustainable. Under the existing scenario, the more the government generates electricity, the more circular debt appears.

To overcome the losses the Discos are out to start punishing the consumers with overbilling of over Rs30 billion a year by manipulating the units, the data available with The News also unfolds informing that in the month of January 2018, end consumers has paid Rs1.970 billion more on account of manipulation in units.

The data clearly shows that in the month of November 2017 as many as 10.5 percent units of electricity are manipulated and are illegally added in electricity bills, in December last year, 14.7 percent and in the month of January this year 3.9 percent units are manipulated and added in the electricity bills.

Though the Power Division, headed by Sardar Awais Laghari, has lunched a campaign against the overbilling, but Discos are still involved in the systematic manipulation of the electricity units to cope with the distribution losses which factually stand at 19 percent.

The relevant joint secretary says that though Federal Minister Sardar Awais Laghari is serious to do away with the curse of overbilling, yet it has been reported that many Discos are still involved in ugly practice and to this effect, in Multan Electric Power Company (Mepco) alone, overbilling has gone up to Rs5.50 billion.

One of the top men in the Power Division also told The News that the Mepco consumers have paid a mammoth amount of Rs5.50 billion in the head of overbilling which is sheer unjustified with the consumers.