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Circular debt 'soars to Rs2.41tr' in first five months of current fiscal

12 Jan, 2022
Circular debt, which is the product of power theft, high losses and other associated factors, is one of the key concerns of lenders and the reason for the massive increase in tariff. AFP/File
Circular debt, which is the product of power theft, high losses and other associated factors, is one of the key concerns of lenders and the reason for the massive increase in tariff. AFP/File

The country’s circular debt has reached Rs 2.410 trillion mark during the first five months (July-November) of 2021-22 as compared to Rs 2.306 trillion in the same period 2020-21, with average growth of Rs 26 billion per month, totalling to Rs130 billion, official sources told **Business Recorder.**

Of the total amount Rs1.411 trillion relates to power producers, Rs 91 billion to Gencos payable to fuel suppliers and Rs 908 billion is parked in Power Holding Limited (PHL).

Circular debt, which is the product of power theft, high losses and other associated factors, is one of the key concerns of lenders and the reason for the massive increase in tariff. According to Secretary Power, National Electric Power Regulatory Authority (Nepra) has allowed average transmission and distribution (T&D) losses of 13.4 per cent whereas actual average losses are 17 per cent. However, Power Division is determined to bring the circular debt down to Rs 1.880 trillion by the end of current fiscal year.

According to official documents, unpaid subsidies have reduced by Rs 3 billion during the first five months of current fiscal year against growth of Rs 59 billion in the same period last year. The volume of unbudgeted subsidy posted a growth of Rs 27 billion during this period from Rs 4 billion in the same period of last fiscal year, showing increase of 575 per cent.

IPPs’ interest charges on delayed payments increased to Rs58 billion, against Rs 34 billion, posting a growth of over 70 percent.

The government has cleared the agreed amounts of IPPs except those established under Power Generation Policy 2002, as they received the first instalment of 40 per cent last week.

Power Division has claimed that the pending generation cost (QTA+ FCA) has reached Rs 137 billion during July-November 2021-22 against Rs 103 billion during corresponding period of FY 2020-21, showing a growth of 33 percent.

The volume of non-payment by K-Electric (KE) stood at Rs 58 billion during the first five months of current fiscal year against Rs 34 billion during the same period last year, indicating an increase of Rs 24 billion in non-payment, with an average growth of Rs 4.8 billion per month.

The amount of Discos’ inefficiency was recorded at Rs 41 billion from Rs 8 billion during this period last year.

The official documents further reveal that Discos under recoveries have also posted a growth of 91 per cent to Rs 44 billion July-December 2021 from Rs 23 billion in the comparable period of the year before. However, prior year recovery declined to Rs84 billion from 131 billion. The amount of PHL mark-up has declined to Rs 11 billion during this period from Rs 33 billion in 2020-21.

The unbudgeted subsidy including AJK and KE is around Rs 75 billion (AJK Rs 46 and KE Rs 29 billion). An amount of Rs 292 billion is receivable from KE as on June 2021 due to subsidy dispute between KE and GoP.

The PHL and IPPs stock also reflects projected adjustment/ payment through federal budget: (i) repayment of Rs 130 billion PHL debt; and (ii) the settlement of outstanding arrears of Rs 427 billion to IPPs in FY 22.

The story was originally published in Business Recorder on January 12, 2022.