Islamabad October 08 2021: The flow of circular debt in the power sector during the July-Aug period has declined from PKR 86 billion of last year to just PKR 13 billion this year, says Minister for Energy, Hammad Azhar
The huge circular debt is alarming not only for the power sector but for the whole economy. As on 30- 06-2021, the circular debt stood at PKR 2,280,149 million against PKR 2,150,425 million on 30-06-2020 showing an increase of PKR 129,724 million during the year. The inefficiencies in the power generation, transmission and distribution and non-payment of subsidies in timely manner are the main causes of increase in circular debt.
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The increasing circular debt is not only a big financial stress for the power sector and national exchequer, it is impairing the economic outlook of the country sending negative signals for foreign investment. The permanent solution to the problem of circular debt lies in developing the efficiency driven and financially viable power sector.
To arrest the pace of accumulation of circular debt, necessary measures, including but not limited to, increase in electricity sales, ensuring optimum utilization of efficient electric power generation plants, converting the tariff from ‘Take or Pay’ to ‘Take and Pay’ wherever possible, retiring the old GENCOs plants with very low efficiency and utilization, converting the tariff of old power plants of WAPDA Hydroelectric from ‘Take or Pay’ to ‘Take and Pay’ basis, retiring the IPPs having completed term of their licences, improving governance of DISCOs to curb T&D losses, enhanced recovery of the billed amount and timely payment of subsidies etc. need to be taken immediately. On its part, the Authority has decided to convert the tariff of all old blocks of GENCOs from ‘Take or Pay’ to ‘Take and Pay’ basis in a bid to reduce capacity payment obligations. Accordingly, during FY 2020-21, the tariff of old blocks of GENCO-III has been converted from ‘Take or Pay’ to ‘Take and Pay’. Further, NEPRA has also engaged WAPDA Hydroelectric to convert the tariff of their old power stations from ‘Take or Pay’ to ‘Take and Pay’ basis.
