ISLAMABAD - A Senate panel was informed Friday that the circular debt parked in Power Holding Company and payable by the distribution companies have reached to Rs 1149 billion, including the circular debt of Rs583 billion and Rs566billion payable by the distribution companies.
Briefing the Senate Special Committee on Circular Debt , official of the power division informed that total circular debt parked in Power Holding Company stood at Rs583 billion parked while Rs566billion are payable by the distribution companies.
The Senate special committee on circular debt that met with Senator Shibli Faraz, was informed by Joint secretary power division Zargham Eshaq Khan that Rs618 billion of the power sector had been transferred to Power Holding Company Limited (PHCL).
Convener committee Senator Shibli Faraz was of the view that supply of electricity to non-paying areas had doubled circular debt .
Some loans had already been paid or rolled over, the outstanding debt on the PHCL now stood at Rs582.86 billion including mark up of Rs153 billion, Zargham said.
On top of this, the debt outstanding against power Distribution Companies (Discos) currently stood at Rs566 billion, he added.
Zargham Khan said that an amount of Rs817.5 billion was outstanding against various public and private sector consumers, in other words, receivables of the Discos.
The joint secretary power division said that PHCL was established in 2009 as a special purpose vehicle with an initial paid up capital of Rs15 million. The SPV was created to consolidate all loans taken by the power sector such as generation companies (Gencos), Discos, transmission company and Wapda, etc.
He said a consolidated Rs216billion liability had been built between 2004 to 2009 and initially parked in PHCL and the company was created with the approval of the then prime minister under the Companies Ordinance Act. However, it was revealed after the first meeting that total mark-up on the consolidated amount including principal amount, overdue amount, total mark-up, total payments due actually stood at Rs307.995 billion.
The was settled by the Government of Pakistan by issuance of treasury bills and Pakistan Investment Bonds and the amount was taken on the federal budget and made part of the enhanced fiscal deficit.
Zargham said after the settlement of 2013 circular debt , a total of 14 commercial loans were currently on the books of PHCL including a unique Rs82 billion loan acquired from OGDCL which was much different from the banking sector and attracted much lower mark up than other commercial loans.
He said the power division made repeated efforts to book all these loans on Discos but were resisted by the regulators on the grounds that these were not development loans and could not be treated as part of the consumer tariff.
As a consequence, the government had to impose surcharges on electricity consumption.
The committee was informed that about Rs159 billion taxes were being collected annually from electricity consumers.
Only Rs 66 against a billing of Rs100 were reaching the Central Power Purchasing Agency (CPPA) owing to inefficiencies, theft and non-recoveries which resulting increase in circular debt . Senator Musadik Malik said the basic reason for accumulation of circular debt was regulator's refusal to transfer the cost of losses to the consumers in full.
The difference between the actual loss and what is allowed to be passed on to consumers adds to the debt, he explained and suggested the regulatory mechanism to change for any progress on circular debt reduction.
Official of the power division clarified that the rate will increase the indirect impact and would increase the Government of Pakistan's liability towards the power sector, due to enhancement of the subsidy level; thus impacting the budget.
Discussing the situation in Balochistan Senator Mir Kabeer Ahmed Muhammad Shahi was of the view that the only solution to the electricity problem in Balochistan was solar energy.
He said that a total cost of Rs 67 billion was needed to solarise 32000 tube wells in all of Balochistan. This, he asserted, would be a onetime investment after which electricity worth 577 megawatts would be saved.
Seconding the views of Senator Shahi, Senator Musadik Malik asserted that solarisation and distributed transmission was the future of the world and Pakistan should make progress in this regard.