Circular debt accumulated in the power sector, is a handy excuse for energy crisis. This debt piles up when a customer fails to the bill. To continue power supply, the producer has to borrow (pay interest charges and repay the contracted loan) to alternative financial sources (unless the govt. makes the bounteous payment). The solution is simple, power distribution companies should promptly pay up the dues to generation companies. In reality the circular debt is only the tip of the iceberg. The real problem is failure to exercise political will to evolve a proper energy `mix,’ based not only on production cost per unit but also on other factors (pollution, safety, etc).

The 1990s agreed mix of 70 per cent hydel and 30 per cent thermal energy stands shelved. Thermal lobby is stronger than hydro lobby. In 2008, the Board of Investment managed to attract $800 million foreign investment for installation of a 600 MW hydropower plant to produce electricity at Rs 4.0 per unit. The investors were hounded out. Why does this happen and why no one cares is another story.

No one even talks about Kalabagh Dam, for lack of political will or myopia. The first thing the USA did was to build the world’s biggest dam. Then China came up with Three Gorges Dam, fifteen cities sank into oblivion and ecology destroyed but, the dam was built, despite international hullabaloo and this dam paved the way for heavy industry and small industries. Each year we lose two to three per cent of Gross Domestic Product to power shortage, and an additional one per cent to gas shortage. Thermal generation requires Rs 3 billion a day, to buy fuel, as against actual collections from consumers of about Rs 1 billion.

Sans cheaper electricity, circular debt will continue to mount. To solve the energy crisis, the government should evolve an optimal energy `mix’ and follow it up with integrated energy plan. Reduce reliance on furnace oil and costly imports, control line losses due to power thefts, and accelerate recoveries from private consumers, besides better maintaining government-owned power generation.


Rawalpindi, June 8.