Pakistan’s energy sector circular debt flow is still soaring with an average growth of about Rs 38 billion per month recorded during the first six months (July-December) 2021-22, well-informed sources told Business Recorder.

Total circular debt has reached Rs 2.476 trillion during first six months of current fiscal year as compared to Rs 2.303 trillion in the same period of 2020-21, with total growth of Rs 196 billion as compared to Rs 152 billion during July-December 2020-21.

Of the total amount Rs 1.494 trillion was related to power producers, Rs 79 billion to Gencos payable to fuel suppliers and Rs 904 billion is parked in Power Holding Limited (PHL).

Circular debt, which is a persistent headache for the government and send an unpleasant message to the International Financial Institutions and local banks is a product of incompetence, unbridled theft, high losses, rampant corruption and other factors.

Power sectors’ average T&D losses are 17 per cent against targets of 13.4 per cent. However, Power Division is determined to bring circular debt down to Rs 1.880 trillion at the end of current fiscal year.

According to sources unpaid subsidies have reduced by Rs 8 billion during the first six months of current fiscal year against growth of Rs 77 billion in the same period last year. The volume of unbudgeted subsidy was Rs 17 billion during this period from negative Rs 5 billion in the same period last fiscal year.

The IPPs interest charges on delayed payments increased to 67 billion July-December 2021-22, against Rs42 billion in the comparable period of the year before, posting a growth of over 60 per cent.

The pending generation cost (QTA+ FCA) has reduced to Rs 100 billion during July-December) 2021-22 against Rs 119 billion during corresponding period of FY 2020-21, showing a decline of 16 percent. The volume of non-payment by K-Electric stood at Rs 67 billion during the first six months of current fiscal year against Rs 40 billion during the same period last year, indicating an increase of Rs 27 billion in non-payment, with an average growth of Rs 11.2 billion per month.

The amount of Discos inefficiency was recorded at Rs 46 billion from Rs 8 billion during this period last year, showing an increase of 475 per cent.

The sources maintained that Discos under recoveries recorded at 66 billion during July-December 2021-22 as compared to negative 37 billion. However, prior year recovery has declined toRs 8 billion from 99 billion. The amount of PHL markup remained unchanged at Rs 26 billion.

The unbudgeted subsidy including AJK and KE is around Rs 75 billion (AJK Rs 46 and KE Rs 29 billion). An amount of Rs 292 billion is receivable from KE as on June 2021 due to subsidy dispute between KE and GoP. The PHL and IPPs stock also reflect projected adjustment/ payment through federal budget: (i) repayment of Rs 130 billion PHL debt; and (ii) the settlement of outstanding arrears of Rs 311 billion to IPPs in FY 22.

This report was first published in Business Recorder on Feb 2, 2022.