The circular debt doubled under PTI government in last two years

 PTI government added Rs 1.48 billion per day in the circular debt during last financial year

PTI government claimed to eliminate the circular debt in power sector before December 2020. From Power minister Umar Ayub Khan to finance advisor Dr Hafeez Shaikh, all made claims to drastically reduced the circular debt during the 2020 financial year.

The government claimed to bring down the monthly circular debt to Rs10 billion -12 billion from nearly Rs 38 billion. But contrary to the claims and statements of government ministers, the circular debt is continued to rise.

Contrary to the claims of curtailing circular debt by Rs 12 billion per month, it went up by Rs 44.8 billion on monthly basis in last fiscal year. In last fiscal year 2019-20, the circular debt increased by Rs538 billion on annual basis indicating that it went up by Rs 44.8 billion on monthly basis and piled up by Rs1.48 billion on daily basis.

The total accumulated cash bleeding of power sector in shape of flows and stocks have crossed mammoth mark of Rs2.2 trillion and there is no permanent solution in sight to curb the increasing burden on the economy. No government in the past 20 years could harness this ever growing debt.

The government has informed the Senate committee by ministry of power couple of days ago that power sector’s liability had spiked by a hefty Rs538 billion or 33.4pc to more than Rs2.2 trillion during the last financial year. The average monthly build-up of almost Rs 45 billion in the overall volume of the debt during the last fiscal is way higher than what the government had projected.

The pace of increase has been even faster than what the PTI ‘inherited’. The total debt stock has almost doubled in two years under the PTI. During the Senate hearing, the government team blamed Covid-19 for the shortfall of Rs 240 billion in the collection of bills and the sharp rise in debt.

PTI government has pursued the same old strategy of raising consumer electricity prices and resorting to revenue-based blackouts, like the previous governments. According to Dawn newspaper, it moved a bill in June to secure the power to impose surcharges on consumer electricity tariffs and special wheeling charges on industrial consumers to control the debt build-up. Recently, it has forced several private power producers to accept a reduction in their returns through changes in their agreements with the CPPA-G to slow down the accumulation of arrears.

Few believe such actions will work. Instead, the expert opinion is that such short-term ‘solutions’ have taken the focus away from the real issues plaguing the sector — high distribution losses, widespread electricity theft, massive unrecovered bills, and so on. It is an untenable situation. What is needed urgently is a plan to liquidate existing stocks and a strategy to stop its further accumulation without burdening the consumers.

The government should bring down the line losses and increase the revenues. The recovery of arrears needs to be improved. New investment in distribution system needed to lower the line losses. One can learn from the past experiences that theft of electricity will increase as the prices goes up. The people who cannot afford to use air conditioners during summer will resort to electricity theft with the help of WAPDA officials. 

Without fixing the long standing issues in the power sector, the new agreements alone might not solve the problem of circular debt. The consumers should not be exploited for the corruption, inefficiency and mismanagement of distribution companies and generation sector. 

                                                               Khalid Bhatti 

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