As circular debt of power sector reaches over Rs650 billion, another circular debt on imported Liquefied Natural Gas (LNG) has started piling up and now stands at over Rs12 billion.
As on September 22 this year, an amount of Rs 4,693 million was receivable from Independent Power Producers (IPPs) on account of Re-gasified Liquefied Natural Gas (RLNG) while an amount of Rs8,021 million was payable to Pakistan State Oil, according to Ministry of Petroleum and Natural Resources.
Government’s failure to bring about structural reforms in the power sector during the last three years has started generating circular debt on account of electricity produced through imported LNG and this will start piling up if recoveries are not made promptly.
At the end of the day, the government has to give either subsidy to power sector or increase electricity tariff to clear the circular debt, they said, adding that either way the end consumers will bear the entire burden.
The first LNG vessel carrying 60,000 tons of imported LNG valued at Rs3.25 billion docked in April 2015 and was mainly financed by Pak-Arab Fertilizer, but the private company has so far paid only Rs 800 million to PSO, and the cost of RLNG that was used by the IPPs is also yet to be recovered, they said.
Pakistan State Oil imports the LNG under a sovereign guarantee and then transfers it to the gas companies, Sui Southern Gas Company Limited (SSGCL) and Sui Northern Gas Pipelines Limited (SNGPL).
SNGPL provides the LNG to the power sector, fertilizer plants and textile industry and it directly recovers gas charges from textile and fertilizer sectors, but there is a complicated process of recovery from the IPPs, sources explained to Business Recorder.
The electricity generated is transferred to the distribution companies for onward supply to consumers and then the same distribution companies are responsible for collecting bills from consumers and repaying to IPPs.
Sources said that there is an increasing gap in billed amount and recovery from consumers due to lines losses of the distribution companies on account of transmission, theft and administrative cost.
This all creates circular debt in the power sector which becomes a final liability of the government, sources said.
