Circular debt exceeds Rs750b, as power sector faces liquidity crunch

ISLAMABAD: Circular debt in power sector has exceeded Rs750b out of which Rs421b falls in ambit of governments definition of circular debt and Rs327b is held in books of Power Holding (Private) Limited (PHPL).

Percentage of circular debt is 20pc higher than the stipulated Rs350b agreed with International Monetary Fund, reported a leading English daily.

Sources revealed that power division had requested finance ministry to release Rs22b on account of subsidy which was refused due to prolonged absence of Finance Minister Ishaq Dar.

Finance division has been in a crisis mode since Ishaq Dar’s indictment and decision-making has become a problem.

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Audited amounts revealed Rs195b is owed to 20 IPPs of 5,910MW which excludes overdue amount for others IPPs generating 2,366MW. Overdue amounts of PSO owed are Rs181b, totalling Rs376b.

But PSO contest these claims and says the actual amount receivable from the government stands at Rs267b as of November 15th.

Circular debt cannot be reduced until full-cost recovery is guaranteed at retail level, said sources. Providing reasons for rise of 20pc in circular debt, sources added amount of Net Hydel Profit (NHP) as calculated by National Electric Power Regulatory Authority (NEPRA) was raised on generation tariff of quarterly basis but wasn’t added to consumers end tariff.

Electricity tariff is determined in two parts, one on monthly adjustments and the other on quarterly adjustments. NEPRA decides monthly tariffs every month and quarterly tariff got notified recently. Sources said Wapda has started billing CPPA as per new rates, but NHL recovery remains zero from Discos, which has caused the circular debt to rise.

Furthermore, sources maintained power sector was undergoing a financial crisis, which will be resolved within a few months.

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