Govt claims on circular debt
Energy Minister Omar Ayub recently claimed that the government would bring the circular debt down to zero by December 2020 which laudable on the surface, but a lot depends on how this will be done, if at all.
However, the claims regarding the reductions made in the circular debt need to be examined more closely before they can be taken seriously. The data he shared with reporters follows earlier claims made in March, in which similar reductions in the debt, and improvements in recoveries, were touted.
The minister claimed that the fresh accumulation of the circular debt would be brought down from Rs38bn per month to Rs26bn by June of 2019. He says this has been achieved on the back of a strong enforcement effort against power thieves as well as their collaborators within the power companies, and they see enough potential in this drive to bring the rate of accumulation down to zero by next year.
Something similar had happened back in 2014 when the rate of accumulation of the circular debt was brought down to zero through ramped-up enforcement and tighter supervision of billing and recoveries. Alas, that moment did not last long since it was dependent on a few individuals in the power bureaucracy who were taking strong ownership of the effort.
It began again once those individuals were transferred out. One lesson from that exercise was that without deeper reforms in power-sector governance, lasting improvements in billing and recoveries would remain elusive. The intention of the government to break the large power distribution companies into smaller ones, starting with the four big ones in KP and Balochistan provinces, and Multan and Lahore, may help lift efficiency.
It is essential for getting renewable energy off the ground, especially through rooftop solar generation. Perhaps the minister can work on a larger plan on how the power sector should be reorganised for this purpose too.
His claims are a reminder of the urgent need for greater transparency in power-sector governance. Financial and operational data is kept hidden from the public and released at a time, and in a form, that serves the interests of those in power. Unlike other areas of the economy, such as trade or fiscal operations, the power sector is under no obligation whatsoever to release any data as per a set cycle.
With regular data releases, the successes and failures of any minister will be self-evident while changing this should be the cornerstone of any reform effort.