Circular debt is continue to rise

Circular debt in power sector crossed Rs 1,930 billion

PTI government continues to blame the PML-N government for piling up the circular debt in power sector. But Chairman Nepra has revealed that circular debt has been piling up at much rapid pace under the PTI government compare to PML-N government.

The monthly increase in the circular debt was on average was Rs10.8 billion in 2017. It went up to Rs25.58 billion by June 2018 and then to Rs41 billion a month by June 2019. It slightly dropped to Rs39.67 billion per month till December 2019 but it again started to rise and now stands at Rs42.42 billions in January 2020.

This circular debt has increased at much faster pace under PTI government since August 2018-despite the fact that prices of electricity has significantly been increased and subsidies abolished. The power consumers are paying much more now for consuming the same power but circular debt is continued to rise.   

 The Chairman Nepra Farooq H Tauseef has revealed in a high powered meeting on power sector that circular debt has reached Rs1, 930 billion. He contradicted the claims of the officials of power ministry that circular debt is Rs1, 782 billion. He challenged the figures of power ministry in the meeting.

He pointed out that the actual size of circular debt was over Rs1.93 trillion. The Nepra chief reported to the prime minister that the total circular debt as of December 31, 2019 stood at Rs1.856 trillion which had increased to Rs1.926tr by end-January 2020. He said Rs492 billion circular debt included Rs325 billion due to inefficiency of the power companies.

Giving a break-up, he said the debt comprised Rs132 billion under recoveries – 90%  instead of 100%  –, Rs150 billion due to interest on delayed payments, Rs33 billion because of inability of the power companies to meet 15.7% target for line losses and instead faced 17.7% actual losses and Rs 10 billion due to inefficient generation companies.

The meeting was informed that the monthly increase in circular debt touched the lowest figure of Rs3.25 billion in June 2016 and had since been increasing every month.

Chairman Nepra has suggested measures to reform the power sector. The hydro power projects in KP, Punjab, and AJK should be promoted on long-term basis and privatisation of loss-making distribution companies and installation of pre-paid meters and outsourcing of meter reading and bill collection responsibilities should be priority.  

                                                                  Rukhsana Manzoor deputy editor