Power sector circular debt has risen to Rs650 billion,Ministry revealed

The total volume of power sector circular debt has risen to Rs650 billion while outstanding liabilities of Pakistan Power Purchase Company (PEPCO) stand at Rs364 billion. This is against the receivables which are estimated at around Rs300 billion, officials of Ministry of Water and Power revealed on Thursday in the National Assembly Special Committee. The Special Committee meeting chaired by Engineer Usman Taraki was called to find out the reasons that have led to the unprecedented power crises in the country.
5 billion units unaccounted for

Explaining the phenomenon of circular debt, Secretary Water and Power Imtiaz Qazi said that the power generation companies produced 24 billion units, out of which PEPCO received bill payment against only 19 billion units, whereas 5 billion units / per annum were unaccounted due to line losses and power theft. He said that the government has been giving a subsidy of Rs2 on each unit of electricity but the Finance Division did not release the allocated funds for subsidy to PEPCO, which has exacerbated the already worsening situation of circular debt accumulation. Qazi told the committee that during the three years tenure of the current government, the price of electricity has been increased by 78 per cent, excluding the increase in power tariff due to regular fuel adjustments.
Non payment of bills

Non payment of electricity bills by the government departments, the private sector especially in FATA, and some areas of Sindh have contributed to inflating the circular debt. This coupled with up to 20 per cent line losses and nonpayment of price differential claims by the Finance Division on account of subsidy, are the major factor behind mounting circular debt in the power sector. According to Chairman PEPCO Rasul Masud, PEPCO’s receivables from the government sector are approximately Rs188 billion. It has to receive Rs8 billion from various departments of federal government on account of electricity bills, Rs30.55 billion is outstanding from provincial governments while Rs46 billion has to be received from Karachi Electric Supply Company. Chairman PEPCO informed the committee that currently various projects of power generation were under construction and he claimed that by end of 2012 about 3000 megawatts of electricity will be added to the national grid.
Defending RPPs

During the briefing Masud Khan defended the government’s policy of rental power plants and argued that the rental power plants were the immediate available solution to address the power crises. Committee member Shahid Khaqan Abbasi stormed out from the committee room over the justification given by Chairman PEPCO regarding rental power plants. Shahid Khaqan said that the incumbent power ministry officials should resign as they have failed to resolve the power crises. The power ministry has given Rs16 billion to rental power plants but despite the capital injection, power production of rental power plants remained negligible. He claimed that the rental power plants are producing less than 100 megawatts of electricity. The chairman committee and other members also expressed their dissatisfaction over the performance of the ministry of water and power and asked them to increase production from the hydel sources of electricity generation.

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