Ris­ing cir­cu­lar debt

The Financial Daily - - NATIONAL -

The cir­cu­lar debt con­tin­ues its high pace with no check. It now stands at about Rs1.4 tril­lion. Presently in­creas­ing quan­ti­ties of power sec­tor in­ef­fi­cien­cies are be­ing con­signed on to the con­sumer through di­verse sur­charges and high goal for losses al­lowed by Nepra. The power sec­tor is call­ing out for good lead­er­ship.

Cir­cu­lar debt, which was tune to the Rs1.14 tril­lion dur­ing the ten­ure of the pre­vi­ous gov­ern­ment, has now risen to Rs1.4 tril­lion. The en­ergy sec­tor's cir­cu­lar debt has at­tained Rs1, 362 bil­lion marks, among which is Rs755 bil­lion is of the Power Hold­ing Com­pany Lim­ited and Rs607 bil­lion of Standby Term Fi­nance Fa­cil­ity loans. Cir­cu­lar debt com­monly emerges out of high elec­tric­ity losses which are ow­ing to theft and in­ef­fec­tive­ness in the dis­tri­bu­tion sys­tem and in­ca­pa­bil­ity to im­prove the to­tal amounts billed to con­sumers by power com­pa­nies. This brings to a fi­nan­cial in­ter­val ow­ing to which the power sec­tor fails to re­lease its dis­charge to­wards fuel sup­pli­ers and banks. Th­ese in re­turn badly af­fect one and the other the en­ergy and fi­nan­cial sec­tors.

More than 12,000MW power plants to be fin­ished with the $25 mil­lion in­vest­ment in en­ergy sec­tor un­der CPEC. Novem­ber 30, 2018 Rs36.2bil­lion was payable to gen­er­a­tion com­pa­nies run­ning plants on gas and re-liq­ue­fied nat­u­ral gas, Rs83.5bil­lion to oil-based com­pa­nies, Rs450.5bil­lion to in­de­pen­dent power plants, Rs28.6bil­lion to nu­clear plants and Rs156.7bil­lion to the Na­tional Trans­mis­sion and Dis­patch Com­pany. With the help of the Asian De­vel­op­ment Bank, the gov­ern­ment was go­ing to in­tro­duce the Ad­vance Me­ter­ing In­fra­struc­ture project in the ar­eas cov­ered by the Lahore Elec­tric­ity Sup­ply Com­pany and the Islamabad Elec­tric­ity Sup­ply Com­pany at a price of $40 mil­lion. In the se­cond stage, the project will be en­larged to the Peshawar Elec­tric­ity Sup­ply Com­pany, Mul­tan Elec­tric­ity Sup­ply Com­pany, Hy­der­abad Elec­tric­ity Sup­ply Com­pany and other ar­eas with high power theft cases. The se­cond phase of the project will be priced at $500mil­lion. The power divi­sion had ini­ti­ated a push to bring to book the el­e­ments in­volved in power theft both within the dis­tri­bu­tion com­pa­nies and con­sumers. A con­fus­ing op­er­a­tion was be­ing con­ducted out against thieves and so far ap­pro­pri­ate po­lice sta­tions had been ac­cessed to or­der about 15,746 FIRs against 21,475 thieves. About 11,356 of them had been listed.

Pak­istan had in­tended to take the share of re­new­able en­ergy in the en­ergy mix to about 25 per­cent by 2025 and to ap­prox­i­mately 30 per­cent by the year 2030. Cur­rently to­tal in­stalled ca­pac­ity is about 33,836 megawatts (MW) and de-rated ca­pac­ity ap­prox­i­mately 31,006MW. To­tal hy­del power pro­duc­tion is some­what 9,730MW and to­tal gen­er­a­tion by Gen­cos is roughly 5,682MW of which 4,177MW is de-rated pro­duc­tion. To­tal ca­pac­ity of ther­mal plants run by IPPs is some­what 15,186MW and their de-rated ca­pac­ity 13,973MW.To­tal in­stalled ca­pac­ity of nu­clear plants is some 1,345MW and de-rated ca­pac­ity not from 1,246. So­lar ca­pac­ity is out near 400MW, wind not far from 1,185MW and Ba­gasse-based plants' in­stalled ca­pac­ity is gen­er­ally 306MW with de-rated ca­pac­ity of ab­bot 295MW. Hy­del con­trib­utes is al­most 27per­cent of the to­tal in­stalled ca­pac­ity, LNG 26 per­cent, nat­u­ral gas is all but about 12 per­cent, fur­nace oil not far from 16 per­cent, coal may be 9 per­cent and re­new­able and nu­clear is out near 5per­cent re­spec­tively.

With over all in­vest­ment of $25bil­lion un­der the Chi­naPak­istan Eco­nomic Cor­ri­dor, power plants of 12,334MW ca­pac­ity would be fin­ished. The CPEC has 18 pref­er­ence projects with a ca­pac­ity of 11,110MW with an in­vest­ment of about $21.7bil­lion and three vig­or­ously nur­tured projects with a ca­pac­ity of about 1,224MW and to­tal in­vest­ment of ap­prox­i­mately $3.3bil­lion.

Power sec­tor is to ob­tain about some­what Rs817.5 bil­lion from pri­vate and gov­ern­ment clients. On the other hand power con­sumers are pay­ing Rs159 bil­lion on taxes in elec­tric­ity bills.

The past gov­ern­ment is as­sumed to have gained im­prove­ment in power pro­duc­tion; it passed on a huge cir­cu­lar debt of Rs1.148 tril­lion to the new gov­ern­ment of Pak­istan. The past gov­ern­ment had come along with a watch word in 2013 that it would bring load-shed­ding to an end dur­ing its five-year pe­riod. It en­tirely con­cen­trated on es­tab­lish­ing ther­mal power plants to ac­cel­er­ate elec­tric­ity pro­duc­tion, but failed to speed up and im­prove the trans­mis­sion and dis­tri­bu­tion net­work, which could not en­dure the bur­den of in­crease power gen­er­a­tion.

The cir­cu­lar debt has be­come a heavy task for all gov­ern­ments, as well as the Pak­istan Peo­ples Party, which gov­erned from 2008-13. The con­di­tion is no dis­tinct for the re­cent gov­ern­ment which will have to deal with a debt bur­den of over Rs1 tril­lion. Out of the to­tal cir­cu­lar debt, Power Hold­ing Pri­vate Lim­ited had bor­rowed an amount of about Rs582.86 bil­lion on the other hand of some Rs566 bil­lion was bor­rowed to shield re­ceiv­ables of power dis­tri­bu­tion com­pa­nies. It was dis­closed that the Cen­tral Power Pur­chas­ing Agency was ob­tain­ing about Rs66 bil­lion out of the Rs100 bil­lion charged in elec­tric­ity bills.

The cir­cu­lar debt has again emerged the weak econ­omy of Pak­istan. The gov­ern­ment has rec­om­mended is­su­ing Rs200 bil­lion Sukuk bonds to con­trol the debt which will is­sue for a year or two but not solve the prob­lem. The morally re­quired gov­ern­ment had pledged to set­tle the prob­lem of cir­cu­lar debt dur­ing the elec­tion con­test and now it should come up to its pledge.

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