Circular debt, Pakistan

Pakistan’s power sector circular debt rises to Rs2.306 trillion

The government confirmed on Jan 7 that power sector’s circular debt went past Rs2.306 trillion as of Nov 30, 2020, up by Rs156 billion over the first five months of the current fiscal year, at a rate of Rs31.2bn per month.

With this on the table, a meeting of the Cabinet Committee on Energy (CCoE) presided over by Planning and Development Minister Asad Umar was also informed by the Ministry of Information Technology that a meterless smart metering system successfully tested and proved on ground was not being adopted by power distribution companies, reported Dawn.

The meeting was told that a bulk share of the increase in circular debt was poor governance in the public sector itself. It was noted that Rs156bn addition in circular debt included non-payment of budgeted and unbudgeted subsidy, delayed payments on account of interest to independent power producers (IPPs), other mark-ups, pending price adjustment on account of quarterly and monthly adjustments and non-payments by K-Electric.

The meeting was informed that on the basis of existing tariff notifications, a total of Rs317bn subsidy was required, but the Ministry of Finance had budgeted only Rs144bn, leaving an unbudgeted subsidy gap of Rs177bn.

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