Govt to settle dispute over circular debt size

The government is considering hiring international third-party auditors to end an ongoing controversy between the Power Division and the regulator over the size of circular debt.

Informed sources said the International Monetary Fund (IMF) is engaged with the Power Division on a regular basis to get clarity on questions raised by the National Electric Power Regulatory Authority over the power sector financials given the fact that power sector performance was at the centre of the $6 billion Extended Fund Facility.

Therefore, the role of thirdparty examination of power sector financials had become imporant. The sources said that an independent validation had become necessary after some cabinet members recently raised concerns over the conflicting statistics and put up written questions for the satisfaction of federal cabinet.

A team of power ministry officials had been assigned to prepare detailed responses to the questionnaire along with a report on questions being raised and the process of reporting by various entities. An official said the third party would not mean independent chartered firms because of different nature of their expertise but specialised institutions well versed with energy sector issues in other countries like the World Bank and the Asian Development Bank (ADB).

The two institutions have remained extensively involved in the country's power sector through a number of projects and reform programmes. The ADB was also engaged with a special task of examination of power purchase agreements with rental power projects during the PPP government and majority of those projects were shelved on the basis of ADB's input.

The Power Division and the regulator had entered into a controversy last month over the size of circular debt and rate of its monthly growth. The matter repeatedly came under discussion at meetings presided over by PM Imran Khan, Finance Adviser Dr Abdul Hafeez Shaikh, Planning Minister Asad Umar and Special Assistant on Petroleum Nadeem Babar.

The Power Division is claiming to have reduced the monthly build up in circular debt from Rs38bn in July 2018 to about Rs1012bn per month through increased recoveries, theft control and loss reduction. Questioning the Power Division's position, the regulator had reported that circular debt had increased by about Rs492bn during FY19 at a monthly average of about Rs41-42bn, as opposed to Rs1012bn per month being advocated by the division.