Cir­cu­lar debt con­tin­ues to rise amid sur­charge

The Pak Banker - - FRONT PAGE -

IS­LAM­ABAD: The cir­cu­lar debt of the power sec­tor is con­tin­u­ing to rise de­spite a se­ries of sur­charges im­posed on con­sumers and other mea­sures taken to con­tain it un­der a three-year plan. An of­fi­cial of the wa­ter and power min­istry said "un­der­bud­get­ing of power sec­tor sub­sidy by the fi­nance min­istry is emerg­ing as a ma­jor stum­bling block along with other struc­tural rigidi­ties in the sys­tem in con­trol­ling the cir­cu­lar debt".

He said the govern­ment had al­lo­cated a sub­sidy of Rs98 bil­lion in the 2015-16 bud­get com­pared to Rs221 bil­lion in 201415 "to ar­ti­fi­cially lower bud­get deficit at the cost of power sec­tor's fi­nan­cial sta­bil­ity". This has been brought to the no­tice of the prime min­is­ter and the fi­nance min­is­ter, he added.

The of­fi­cial said that sub­sidy ac­tu­ally be­ing passed on by dis­tri­bu­tion com­pa­nies (ex-Wapda Dis­cos) to res­i­den­tial, agri­cul­tural, AJK and Fata con­sumers was more than Rs200 bil­lion. "How can this be cov­ered with a Rs98 bil­lion bud­get?" Be­cause of this rea­son, the cir­cu­lar debt in­creased al­though it had been suc­cess­fully capped in the first year (2015) due to "his­tor­i­cal re­duc­tion of 5.8 per cent in ag­gre­gate tech­ni­cal and com­mer­cial (ATC) losses".

A fi­nance min­istry spokesman did not agree. In a writ­ten re­ply, he said the govern­ment had care­fully bud­geted Rs118 bil­lion tar­iff dif­fer­en­tial sub­sidy (TDS) for the cur­rent year and re­ferred to an­other Rs20 bil­lion sub­sidy ear­marked for KElec­tric and Rs98 bil­lion for Dis­cos. He said the TDS for Dis­cos had been worked out by cal­cu­lat­ing the dif­fer­ence be­tween Nepra-de­ter mined tar­iff and ef­fec­tive con­sumer tar­iff and the num­ber of units es­ti­mated to be sold dur­ing the year.

Sim­i­larly, the KE sub­sidy has been es­ti­mated af­ter no­ti­fi­ca­tions by the govern­ment for the fis­cal year and ad­just­ing the con­sumer tar­iff in line with the power min­istry's no­ti­fi­ca­tions. "Once the quar­terly no­ti­fi­ca­tions are ap­plied, the sub­sidy is es­ti­mated to largely fall in line with the bud­get es­ti­mates," he added. An­other of­fi­cial said that the cir­cu­lar debt cap­ping plan was based on a num­ber of as­sump­tions and ac­tions planned to be taken by var­i­ous min­istries, but fell as the low oil price bo­nanza set in. The govern­ment started keep­ing ma­jor part of the monthly fuel price ad­just­ment against do­mes­tic con­sumers below 300 units per month as a wind­fall and did not fo­cus on struc­tural is­sues - low re­cov­er­ies and high losses.

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