ISLAMABAD -The monster of circular debt, the root cause of current loadshedding, is rising its head again, soaring up to over Rs 300 billion, all due to the mal-administration and complete failure of the government to recover outstanding power dues.

The PML-N government had cleared circular debt worth of Rs 480 billion after assuming the charge last year with great pomp putting all the blame on the previous government, which failed to tackle the issue due to its poor governance. The government, on the same time, came up with assurance that they would not let it grow with efficient working, checking power theft, controlling line losses and plugging other pilferages in the power supply system but all their claims fell flat when the circular debt not only piled up to Rs 300 billion but around Rs1 billion added in it by every passing day.

“Level of circular debt has gone beyond Rs 300 billion, which is increasing with the passage of every single day mainly because of mis-governance on the part of incumbent government”, said Abdullah Yousuf Chairman Advisory Council of Independent Power Producers (IPPs). Talking to The Nation, he said, “Circular debt increasing due to two reasons, one, difference between sale and cost prices, which covered through subsidies. The second reason, main one, is government’s inability to recover power dues”. 

Abdullah Yousaf said that we have demanded of the government several times to clear the debt, but no avail. Ongoing power loadshedding could be reduced if government clears the circular debt, as it would increase the demand, he added. 

Meanwhile, according to the documents of Finance Division, the circular debt was recorded at Rs 270 billion in nine months (July-March) of the ongoing financial year 2013-14. The debt is increasing by Rs 30 billion in every month, taking it to Rs 300 billion by end of April 2014. The break-up of circular debt revealed that carry forward of previous year 2012-13 was Rs 81 billion, non-recovery of DISCOs are Rs 79 billion, non-payment of KESC is Rs 11 billion, subsidies due from government are Rs 48 billion, mark-up liability is Rs 44 billion and others are Rs 7 billion. The aforesaid break-up did not include the figures of April month.

The Finance Division blamed several factors for soaring circular debt. The factors included adverse fuel mix, difference between the tariff determined by National Electric Power Regulatory Authority (NEPRA) and the tariff notified by the government, delay in tariff determination by NEPRA as well as delay in fuel adjustment and belated release of tariff differential subsidy. Others factors included poor revenue collection by DISCOs, non-recovery of receivables from federal and provincial departments and high transmission and distribution losses.

Meanwhile, the Finance Ministry has stated the steps to curtail the circular debt including raising electricity tariff rates for commercial, industrial and bulk consumers from August 1, 2013 and for domestic consumers from October, 1 2013. As a result of tariff rationalisation, tariff differential gap has been reduced from Rs 5.88 to Rs 3 per unit, reducing subsidy burden correspondingly. Additionally, to maximise recovery of dues performance contracts are being signed by Ministry of Water & Power with management of DISCOs, with benchmarking of their recoveries and achieving improvements and a nation-wide campaign has been launched to eliminate electricity theft. Special teams assisted by FIA and other law enforcement agencies at provincial level are carrying out raids against big energy thieves in an effective manner. The government is also working on the enactment of a law to curb the theft of electricity.

The government is evolving a mechanism to ensure the payment from federal and provincial government departments and in pursuance of Council of Common Interest (CCI) decision, a committee headed by Minister for Water & Power has been set up to finalise the mechanism for at source adjustment of Federal & Provincial departments dues payable to power sector entities. An official on condition of anonymity said that real issue is that most of the measures mentioned by Finance Division other than tariff rationalisation faced implementation issues. He said that federal and provincial governments have to be on the same page to solve the structural problems of power sector as provincial governments’ co-operation would be critical towards implementation of all decisions related to power sector.