Circular debt again
The rising burden of circular debt has become a serious issue. According to the latest reports, the constant flow of circular debt has built up to Rs566 billion in addition to old stocks of about Rs500bn in a special purpose account, accumulating the total liability to about Rs1.066 trillion. This was reported to a special committee of the Senate on circular debt by the Power Division at a meeting a few days ago where the power distribution companies claimed that almost Rs100bn circular debt was caused by unjustified sales tax collections by the Federal Board of Revenue even on unrealised bills. The meeting was also informed that a significant increase in circular debt had accumulated in the recent months after the former PML- N government decided in October 2017 to end loadshedding even in areas with high losses and theft.
The Discos have complained that they were charged GST on total turnover and subsidy paid by the government instead of the 2.1pc margins. They said former adviser on finance Dr Salman Shah had addressed the issue but it has resurfaced since 2013 and they are being subjected to over- taxation. According to a report, the previous government was convinced by the Power Division and a summary was also moved with consensus for the removal of an inherent anomaly through the finance bill but it somehow got through. In this connection, the Senate Special Committee has emphasised that both the government and people of the country should be sensitised to the circular debt issue and the problem must be addressed immediately.
The Ministry of Energy has proposed that in order to eliminate the circular debt, it is necessary to reframe policies, especially those that pertain to power distribution companies. A comprehensive report by the Power Division has thrown light on overall situation of the energy sector and discussed remedial measures that would be taken to reduce the debt. It has been pointed out that in an attempt to make progress, policies must be reframed and boards of power distribution companies must comprise professionals having no vested interest. This is not difficult as every distribution company has its own planning wing, which should come up with new ideas and solutions to address the sector's woes.
A serious problem of the energy sector is rising transmission loss. The loss in some cases is as high as 30 percent. Some time back, keeping in view the growing demand, a plan had been put in place to upgrade the transmission lines but nothing came out of it. The government recently instructed that electricity must be supplied to all areas without any interruption and regardless of the bill recovery status. This has caused an increase in line losses that has put more burden on power producers and distributors and increased the circular debt.
In order to address the issue of circular debt, an important need is to collect province- wise details of industrial, domestic and commercial defaulters. Equally important is the need to find out- of- the- box solutions to the challenges facing the power sector. In this regard, the planning wings of the companies need to be more proactive. Theft has to be stopped with a heavy hand and a new drive needs to be launched for bill recovery, especially from government departments which are among the biggest defaulters. Corruption also needs to be curbed which is a principal reason for the multiple woes the power sector suffers from, including circular debt.