PTI govt adds Rs565 billion to circular debt

[313ghazi]

The solution is to make consumers pay the full price for thier electricity. Government should not subsidise energy, rather ensure energy is created at cheap prices. State owned companies should be selling it at just above cost price.

 

[Dil_Pakistan]

And it is decreasing. Our debt problem is so bad so far we have only been able to reduce how much extra debt we have each month. Govt hopes by 2021, to not be taking any extra debt each month. It will then work on reducing existing debt.

What is this extra debt they take on every month? It is unpaid subsidies for energy.

So for arguments sake...

The true cost of electricity from the supplier is 20rs a unit. Govt was asking them to give it to the consumer at 10rs a unit and govt would pay the remaining ten. However government only has enough money to pay 2rs of that, so 8rs is left as debt. Now govt has said consumer must pay 12rs and govt will pay 8.

Govt started paying 3 of that 8, then 4, in the hope that by 2021 it can pay all 8rs per unit it is subsidising. The hope then is to start paying all the previous debt owed too.

These numbers are completely made up by me. I am just using them to illustrate the situation.

Thanks for the explanation. Also another point i must add is that alot of this problem has also aggravated bcz of those expensive IPP agreements which all start from BB time & even in last Govt. where they focused more on generation through expensive means so to curtail the "shortfall" than making the whole system better first. I belief it is said that Pakistan actually has excessive installed capacity of electricity than its demand but doesn't has the system to effectively and efficiently "manage" or "deliver" it.

The current Government is said to be working to improve this exact system and curtail line losses, theft etc. It is also going for cheaper (lpg instead of funace oil for example), dams and renewable means (solar, wind etc.) to generate electricity.

Also i belief that the ministry has said that they will NOT be renewing these expensive IPP agreements once they retire/come to an end.

 

[Yaseen1]

the problem is not limited to ending subsidy,it has effects on macroeconomic scale,if govt not give subsidy it will discourage industrial growth which will not increase exports and employment and as a result foreign reserves inflow from exports will fall,similarly if public become much poor and unable to pay bills of too much expensive electricity it will result in rise in poverty and social unrest as well as lack of savings will result in less money available to banks for granting loans to businesses,i have heard that govt has decided to raise electricity price 25rs/unit so i not think govt will be giving much subsidy to public ,major problem is to control govt expenses and waste of public money on unnecessary expenses by govt ministers and officers

And it is decreasing. Our debt problem is so bad so far we have only been able to reduce how much extra debt we have each month. Govt hopes by 2021, to not be taking any extra debt each month. It will then work on reducing existing debt.

What is this extra debt they take on every month? It is unpaid subsidies for energy.

So for arguments sake...

The true cost of electricity from the supplier is 20rs a unit. Govt was asking them to give it to the consumer at 10rs a unit and govt would pay the remaining ten. However government only has enough money to pay 2rs of that, so 8rs is left as debt. Now govt has said consumer must pay 12rs and govt will pay 8.

Govt started paying 3 of that 8, then 4, in the hope that by 2021 it can pay all 8rs per unit it is subsidising. The hope then is to start paying all the previous debt owed too.

These numbers are completely made up by me. I am just using them to illustrate the situation.

 

[Rasengan]

resengen

you are a trader and charting expert

give me your honest opinion on the pakistan economy

The previous bearish move (2017-19) was an obvious ABC zigzag structure. The current bullish movement has the look of an impulsive wave starting from August. However, it remains to be seen whether this is wave (A) or Wave (1). But what gives a strong indication of bulls controlling the market is the accumulation that took place in May last year. Tom Williams would call that Bagholding. This occurs when trading volume is much higher than average and the closing price is usually in the middle. The fall in volume in the next few months was telling us professionals were consuming supply even though the spread was fairly even.

My count is different from other Ellioticians. 2017 concluded, in my opinion, the end of wave (3) rather than the end of wave (5) with a higher degree wave (1). You might ask the question why? The answer lies in the writings of RNE. He spoke on the concept of alternation and the impulsive wave structure having the right look (proportionality). Wave (2) in 2008 had a clear sharp zigzag pattern that meets the typical guideline. This means wave 4 is most likely going to be sideways and a pattern that is different from a zigzag. Notice the 2017 downward movement is also a sharp zigzag pattern. This information is imperative because we can now come up with the assumption that the correction phase is still most likely not over. Any three wave structure equals either a wave (A) or (W). So to answer the question above whether the current bullish move is either wave (A) or wave (1) should be fairly straightforward.

A strong (B) wave could suggest an expanded Flat or a triangle. No one can predict this, but if we take into account the laws of probabilities then most likely the market will play out a triangle because of the state of the Pakistani economy. I have and never will believe for one second that IK can wave a magical wand and everything will be splendid in Pakistan. He must make difficult choices and I hate to be in his position. Pakistan needs to increase its investment-to-GDP ratio to over 30 percent in the next decade if it is to generate sufficient employment to productivity. Our economic problems are structural and not just cyclical. Deep economic reforms are needed to remove structural imbalances to increase efficiency and competitiveness and to spur entrepreneurship along with innovation. Export needs to be a major driver of the economy so it would be interesting to see what the next data results are. Sustained high growth is important, but the state must also focus on inclusive growth so that society mostly the poor share the gains of economic growth. What makes me sad though is the failure of any Govt not starting a Sovereign Wealth Fund. Pakistan does not need to reinvent the wheel we just need to copy the growth stories of other countries.

 

[313ghazi]

the problem is not limited to ending subsidy,it has effects on macroeconomic scale,if govt not give subsidy it will discourage industrial growth which will not increase exports and employment and as a result foreign reserves inflow from exports will fall,similarly if public become much poor and unable to pay bills of too much expensive electricity it will result in rise in poverty and social unrest as well as lack of savings will result in less money available to banks for granting loans to businesses,i have heard that govt has decided to raise electricity price 25rs/unit so i not think govt will be giving much subsidy to public ,major problem is to control govt expenses and waste of public money on unnecessary expenses by govt ministers and officers

I agree. Price control must come in slowly. Also price paid must depend on usage. Govt can reduce the burden on themselves by rolling out residential solar panels - tax free.

New setup businesses should get short term subsidy to encourage investment, rich businesses should pay more than SME's.

Fact is no industry has a god given right to exist. All companies should operate on a viable business model, that includes cost of energy.

 

[8 pass charlie]

Its teenday ryt?

yep tendey.

above quote is said for India.but is completely and fully applicable to us and we are working very hard to prove him right

 

[313ghazi]

Thanks for the explanation. Also another point i must add is that alot of this problem has also aggravated bcz of those expensive IPP agreements which all start from BB time & even in last Govt. where they focused more on generation through expensive means so to curtail the "shortfall" than making the whole system better first. I belief it is said that Pakistan actually has excessive installed capacity of electricity than its demand but doesn't has the system to effectively and efficiently "manage" or "deliver" it.

The current Government is said to be working to improve this exact system and curtail line losses, theft etc. It is also going for cheaper (lpg instead of funace oil for example), dams and renewable means (solar, wind etc.) to generate electricity.

Also i belief that the ministry has said that they will NOT be renewing these expensive IPP agreements once they retire/come to an end.

We also need so switch from importing fossil fuels to renewable such as solar. Even if it means importing equipment initially. Ideally we should be doing everything possible to setup the manufacture of renewable tech in our country.

I'd like to see at least 1 solar panel on every roof in Pakistan by 2030. The impact on residential consumption would be significant.

I'd also like to see all rickshaws, motorbikes and buses by electric powered by then (at least in urban areas).

 

[RoadRunner401]

Didn't the Pakistan Tehrik-e-Insaf Government last year go on and on about bringing the circular debt to Rs50 - 60 billion by July 2020 and zero by the end of 2020?

Looks like PTI's Baby DebtZilla disagrees.

I am glad you brought this up since you are always scouring the internet looking for any news that can be used as propaganda against IK.


Let's start from 2018. In January 2018, circular debt stood somewhere between Rs450-475 billion. The government at that time decided to clear Rs200 billion; between January and May 2018, the then government paid Rs150 billion by borrowing, and another Rs50 billion was sought approval in the last week of the PMLN government, but that never got disbursed. On June 30, 2018, the circular debt stood at Rs600 billion even after all the payments that were made. Why? Because they did not take into account the circular debt being generated during five months of 2018 i.e. Jan-May.

The main problem that this government faced when it took office at the end of August 2018. There was Rs226 billion of prior year adjustments that the previous government had decided not to pass on. Two major portions of that were the net hydel profits, and the capacity payments incurred on CPEC energy projects that had started operating. These prior year adjustments not passed on were based on the indexations that NEPRA had to apply only till the end of 2017; all capacity payments on new additions and the 35 percent exchange movement since the beginning of 2018 up until now had also not been passed on. So, in todays indexed, corrected and passed on cost, we are looking at Rs425billion additional amount that has to be put in the bills.

DISCOs had not been updating their costs to NEPRA for tariff determination for two years due to political pressures, and it was only after the previous government left the office and the interim government took charge that the DISCOs submitted the information that NEPRA had been asking for tariff determination. The existing tariff was at Rs11.71; and in October 2018 – NEPRA notified a tariff of Rs15.31 after incorporating the prior year adjustments of Rs2.18 up until 2017, plus around Rs1.6 for the ongoing year until October 2018. Technically, when the PTI government came into power, the rate should have been around Rs14 had Rs2.18 on account of prior year adjustment having been passed into the rate already. But since it wasn't, NEPRA proposed a tariff increase of Rs3.82.

A large part of the Balochistan tube well subsidy that has both the provincial as well as a federal component has not been paid for the past 10 years. This subsidy is the single largest component or around Rs197 billion in the Rs950 billion receivables of the DISCOs from all types of customers.

I am sure most educated here will get the situation we are in and why, but you @Pakistan Space Agency and people like you are trying to blame problem created by you on PTI, so i'll make it crystal clear, PML_N And PEE PEE PEE, governments had signed deals that were too expensive to carry on, but they didn't care as their solution to all was borrowed and add it to the National debt.

So the @Pakistan Space Agency, you are trying to convince us all that we were better off under PML_N fine, just tell me how were those genuineness were going to pay off the ever increasing national debt, circular debt, with empty bank accounts and imports subsidized, power subsidized, almost non existence tax base? I am 100% sure you will ignore my post.


PML_N and pee pee pee way of government was unsustainable, like it or not we are in this mess and it needs to be addressed.

 

[Pakistan Space Agency]

I am glad you brought this up since you are always scouring the internet looking for any news that can be used as propaganda against IK.

Let's start from 2018. In January 2018, circular debt stood somewhere between Rs450-475 billion. The government at that time decided to clear Rs200 billion; between January and May 2018, the then government paid Rs150 billion by borrowing, and another Rs50 billion was sought approval in the last week of the PMLN government, but that never got disbursed. On June 30, 2018, the circular debt stood at Rs600 billion even after all the payments that were made. Why? Because they did not take into account the circular debt being generated during five months of 2018 i.e. Jan-May.

The main problem that this government faced when it took office at the end of August 2018. There was Rs226 billion of prior year adjustments that the previous government had decided not to pass on. Two major portions of that were the net hydel profits, and the capacity payments incurred on CPEC energy projects that had started operating. These prior year adjustments not passed on were based on the indexations that NEPRA had to apply only till the end of 2017; all capacity payments on new additions and the 35 percent exchange movement since the beginning of 2018 up until now had also not been passed on. So, in todays indexed, corrected and passed on cost, we are looking at Rs425billion additional amount that has to be put in the bills.

DISCOs had not been updating their costs to NEPRA for tariff determination for two years due to political pressures, and it was only after the previous government left the office and the interim government took charge that the DISCOs submitted the information that NEPRA had been asking for tariff determination. The existing tariff was at Rs11.71; and in October 2018 – NEPRA notified a tariff of Rs15.31 after incorporating the prior year adjustments of Rs2.18 up until 2017, plus around Rs1.6 for the ongoing year until October 2018. Technically, when the PTI government came into power, the rate should have been around Rs14 had Rs2.18 on account of prior year adjustment having been passed into the rate already. But since it wasn't, NEPRA proposed a tariff increase of Rs3.82.

A large part of the Balochistan tube well subsidy that has both the provincial as well as a federal component has not been paid for the past 10 years. This subsidy is the single largest component or around Rs197 billion in the Rs950 billion receivables of the DISCOs from all types of customers.

I am sure most educated here will get the situation we are in and why, but you @Pakistan Space Agency and people like you are trying to blame problem created by you on PTI, so i'll make it crystal clear, PML_N And PEE PEE PEE, governments had signed deals that were too expensive to carry on, but they didn't care as their solution to all was borrowed and add it to the National debt.

So the @Pakistan Space Agency, you are trying to convince us all that we were better off under PML_N fine, just tell me how were those genuineness were going to pay off the ever increasing national debt, circular debt, with empty bank accounts and imports subsidized, power subsidized, almost non existence tax base? I am 100% sure you will ignore my post.

PML_N and pee pee pee way of government was unsustainable, like it or not we are in this mess and it needs to be addressed.

Yaap, yaap, yaap. Cry me a river.

 

[hussain0216]

Yaap, yaap, yaap. Cry me a river.

And this is the problem

We are at this point because of decades of corrupt politicians and politics

Rather then understand this and support change

You clowns want to damage and derail the government in the hope that the same corrupt bastard's who got us into this mess get back into power


It dosent make sense, are you enemies of Pakistan?

 

[Pakistan Space Agency]

And this is the problem

We are at this point because of decades of corrupt politicians and politics

Rather then understand this and support change

You clowns want to damage and derail the government in the hope that the same corrupt bastard's who got us into this mess get back into power


It dosent make sense, are you enemies of Pakistan?

So, Pakistan is going to be saved by Cartoon-e-Azam PM Imran Khan who within first year of his tenure:

• Lost Kashmir after 72-years of Pakistani history.
• Allowed India to carry out air strikes on a non-Kashmiri province for first time in nearly 50-years.
• Allowed Indian Foreign Minister to become the Chief Guest at OIC for the first time in 51-years.
• A sitting Army Chief made to beg for his extension.
• A former Army Chief given the death sentence.
• Devalued Pakistan's currency by around 40% in just one -year.
• Decreased Pakistan's Nominal GDP by around $35 billion.
• Imposed worst form of poverty on the nation.
• Maligned China for plotting corruption in Pakistan via CPEC.
• Backstabbed Turkey and Malaysia to get Saudi loan.

Please keep such heroes in Disneyland. Pakistan doesn't need this sort of bonga revolution where only Pakistan loses.

 

[hussain0216]

So, Pakistan is going to be saved by Cartoon-e-Azam PM Imran Khan who within first year of his tenure:

• Lost Kashmir after 72-years of Pakistani history.
• Allowed India to carry out air strikes on a non-Kashmiri province for first time in nearly 50-years.
• Allowed Indian Foreign Minister to become the Chief Guest at OIC for the first time in 51-years.
• A sitting Army Chief made to beg for his extension.
• A former Army Chief given the death sentence.
• Devalued Pakistan's currency by around 40% in just one -year.
• Decreased Pakistan's Nominal GDP by around $35 billion.
• Imposed worst form of poverty on the nation.
• Maligned China for plotting corruption in Pakistan via CPEC.
• Backstabbed Turkey and Malaysia to get Saudi loan.

Please keep such heroes in Disneyland. Pakistan doesn't need this sort of bonga revolution where only Pakistan loses.

Compared to the corrupt trash that came before actual change is happening

Another few years of the same old Nawaz or ZARDARI would destroy us as a state

It is now or never for Pakistan we find the courage to destroy nawaz, zardari and their acolytes or they will devour Pakistan in their greed

 

[Syed1.]

And this is the problem

We are at this point because of decades of corrupt politicians and politics

Rather then understand this and support change

You clowns want to damage and derail the government in the hope that the same corrupt bastard's who got us into this mess get back into power


It dosent make sense, are you enemies of Pakistan?

At the risk of sounding racist, I feel like alot of people from a certain province cannot bear seeing anyone other than a Sharif as the PM. This feeling is very very prevalent in the middle aged to older demographic irrespective of social status or education and is also reflected in the voting pattern.


Therefore, they would rather have a known looter and plunderer who brought the country to the brink of bankruptcy not once but TWICE, at the helm; rather than Imran Khan, a guy who is genuinely trying to save the sinking ship.

 

[BATMAN]

but they were claiming to end circular debt by 2021

bunch of liars and foreign agents. They are here to destroy Pakistan beyond fix. Just wait for the next ruler and he'll explain us what they did in 5 years.

Yeh to nawaaajooo keh nasheh mein he rehtaah hai

PTI has authority to arrest editor of news paper!

 

[Syed1.]

but they were claiming to end circular debt by 2021

Its not their fault that you are dumb and ignorant.


PTI government and more specifically minister of power and energy Omar Ayub Khan always said that they are going to reduce the monthly INCREASE in circular debt to zero by December 2021. There is a difference between monthly increase and total debt. Please educate yourself before mouthing off.