Power sec­tor slip­page

The Pak Banker - - FRONT PAGE -

De­spite of­fi­cial claims to the con­trary, load-shed­ding has re­turned and, along with it, the de­mon of cir­cu­lar debt has also raised its ugly head. A new sched­ule of load­shed­ding has been an­nounced both for ru­ral and ur­ban ar­eas. The root cause of the prob­lem is cir­cu­lar debt. Last year in July, the PML-N gov­ern­ment had an­nounced that cir­cu­lar debt had been elim­i­nated with the re­tire­ment of Rs480 bil­lion. But two months later re­ports be­gan to ap­pear in the Press that power sec­tor re­ceiv­ables had again mounted to more than Rs400 bil­lion.

Some time back the State Bank men­tioned the grow­ing cir­cu­lar debt as a threat to the coun­try's fis­cal sta­bil­ity. Re­cently of­fi­cial rep­re­sen­ta­tives of the Na­tional Trans­mis­sion & Des­patch Com­pany in­formed the Se­nate that cir­cu­lar debt had again swollen to bil­lions of ru­pees which was payable to power gen­er­a­tion com­pa­nies alone. One year back, IMF asked for a com­plete au­dit of the cir­cu­lar debt to de­ter­mine the ex­act size of the out­stand­ing amount. Ac­cord­ing to me­dia re­ports, in the last few months the li­a­bil­i­ties have con­tin­ued to mount and reached the fig­ure of more than Rs800 bil­lion.

The gov­ern­ment is at a loss how to tackle the prob­lem. How is it that you clear the debt and it re­turns in no time to haunt you? Surely, there is some­thing se­ri­ously wrong some­where in the sys­tem due to which the prob­lem of cir­cu­lar debt re­fuses to go away. It may be re­called here that be­sides last year's mas­sive debt re­pay­ments, ef­forts were made later, too, to clear the debt but the sit­u­a­tion only wors­ened with time. Most of the cir­cu­lar debt is ac­counted for by pend­ing pay­ments to the power pro­duc­ing plants and the fuel sup­pli­ers.

Where lies the rub? Why de­spite an in­crease in rev­enue re­sult­ing from a sub­stan­tial hike in power tar­iff cir­cu­lar debt is back again? Ac­cord­ing to ex­perts, the ma­jor rea­sons for cir­cu­lar debt ac­cu­mu­la­tion in­clude fail­ure on the part of the au­thor­i­ties con­cerned to un­der­take struc­tural re­forms, de­lays in the pri­vati­sa­tion process and con­tin­u­ing in­ef­fi­cien­cies at all lev­els rang­ing from gen­er­a­tion, trans­mis­sion, dis­tri­bu­tion and non-re­cov­ery of out­stand­ing bills. The sys­tem is shot through and through with cor­rup­tion which re­sults in tremen­dous loss of rev­enue. There is to­tal lack of trans­parency, and the vested in­ter­ests in the sec­tor stub­bornly re­sist any re­form mea­sures.

In the given cir­cum­stances, the power bu­reau­cracy which has sig­nally failed to de­liver should be given a shake-up and pro­fes­sion­als should be in­ducted to man­age the power sec­tor. Among other things, it should be made manda­tory for the power sec­tor man­agers to re­lease op­er­a­tional and fi­nan­cial data and details on a reg­u­lar ba­sis so that pol­icy mak­ers as well as the gen­eral public may know where the fault lines are and how these can be cor­rected. It has also been sug­gested that all dis­cre­tionary author­ity should be done away with and in­de­pen­dent boards should be formed to make poli­cies and su­per­vise op­er­a­tional details on a reg­u­lar ba­sis to plug leak­ages and elim­i­nate wastage.

The present gov­ern­ment has taken the easy route of cut­ting sub­si­dies and rais­ing tar­iff to tackle the is­sue of cir­cu­lar debt. But this is a counter-pro­duc­tive ap­proach. Trans­mis­sion losses, es­ti­mated to be as high as 30-35 per­cent, are a ma­jor drain on the sec­tor. Un­less these losses are min­i­mized, power tar­iff hike alone won't help much. The con­sumer is al­ready over­bur­dened. He should not be bur­dened fur­ther.

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