Power sector touches circular debt of Rs. 2 trillion

Power sector touches circular debt of Rs. 2 trillion

The energy sector of Pakistan has touched a new low after circular debt reaches Rs. 2 trillion.

On March 17, 2020, Power Division explained to the Cabinet that on August 20, 2018 circular debt was Rs 1.262 trillion (Rs 658+604) and till December 2019, the amount was Rs 1.765 trillion (961+ 804 billion). The build-up during the period was Rs 503 billion. It was also claimed that circular debt build-up till June 2020 was to be an addition of Rs 134 billion for one year, which was as per planned circular debt capping plan.

According to the circular debt plan approved by ECC major steps need to be taken to improve the situation including decreasing line losses, improving power distribution collection, rationalising subsides and reducing annual flows to less than Rs 75 billion per annum.

According to Chairman Nepra, the stock of circular debt (payables to IPPs and Gencos) and debts parked in the books of PHPL stood at Rs 1.926 billion as of February 2020. Freezing of monthly tariff adjustments for five months has added another Rs 70 billion to the circular debt.

PM Imran khan has stated repeatedly that power sector is a huge challenge for the government and it needs to be handled following Turkey’s model.