Rising circular debt

[maithil]

QUIETLY, behind the noise and fury of the headlines, the circular debt continues its march. If one only looks at the figures being given publically for the total size of the monster, it is alarming to note the steep increase. The power division officials just told the Public Accounts Committee that the figure has now crossed about Rs1.4tr. In August 2018, while testifying before a Senate panel, the same officials had given the figure of Rs1.14tr. This would mean that the circular debt has climbed by more than Rs200bn in the 137 days in between these two dates. For perspective, consider that the same figure stood at Rs922bn at the end of November 2017, meaning that the size of the debt increased faster from August till today than it did in the preceding ten months. This sharp uptick needs focus, and parliamentary bodies have good reason to summon power division officials and ask more detailed questions about where exactly the acceleration in the circular debt is coming from.

There are a number of different components of the circular debt, and the power division officialdom is becoming quite adept at presenting the numbers in a way to downplay the problem. For example, one method is to omit the amount held by the Power Holding Pvt Ltd, a special-purpose vehicle created specifically for the purpose of financing the circular debt for the power sector, and which pays its financial costs via surcharges built into the consumer tariff. Creating confusion around the numbers is a common tactic for officialdom to avoid scrutiny, and in the power sector they are free to indulge in this habit to their full satisfaction. In the same time period, from August 2018 till today, the recommendations of the Special Committee on Circular Debt formed by the Senate have been silently awaiting action. These recommendations include the establishment of a high-level monitoring committee, as well as a slew of deep-rooted reforms.

Left to its own devices, with the government working in one corner and the bureaucracy in another, this state of affairs will not abate. The increase in the rate of accumulation is alarming because the circular debt can ultimately shut down the power system and impose nearly crippling costs on the fiscal framework. To get a handle on the situation, the minister needs to develop a standard reporting template for all power sector data, both operational and financial, through which progress can be monitored effectively to control recoveries and keep power sector debt from climbing to unmanageable levels. At Rs1.4tr, we might already be approaching that stage. At the moment, increasing quantities of power sector inefficiencies are being passed onto the consumer through miscellaneous surcharges and an elevated target for losses allowed by Nepra. The power sector is crying out for proper leadership, and the costs of inaction are rising by the day.


https://www.dawn.com/news/1455357/rising-circular-debt

 

[Abdussamad]

For example, one method is to omit the amount held by the Power Holding Pvt Ltd, a special-purpose vehicle created specifically for the purpose of financing the circular debt for the power sector, and which pays its financial costs via surcharges built into the consumer tariff.

As the article says they swept the circular debt under an SPV to hide it. Now they are doing the same for loss making public sector enterprises. This is the so called wealth fund Sarmaya Pakistan Company. All they can do is cook the books. They can't actually fix anything.

 

[maithil]

As the article says they swept the circular debt under an SPV to hide it. Now they are doing the same for loss making public sector enterprises. This is the so called wealth fund Sarmaya Pakistan Company. All they can do is cook the books. They can't actually fix anything.

Yes. Current setup seems to be very proficient in brushing the problem under carpet. Creating a wealth fund for Loss making enterprises is very dangerous idea.

 

[pkuser2k12]

Again with the propaganda

Dawn News claims that in PTI's government circular debt has increased to 1.1 trillion rupees the truth is this debt was passed on to new government by previous PMLN's government

Source: Express News

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The Express Tribune > Business

Circular debt of Rs1.1tr passed on to new govt




By Zafar Bhutta


Published: August 18, 2018

The power sector is to receive Rs817.5 billion from private and government clients. On the other hand, power consumers are paying Rs159 billion on account of taxes in electricity bills. PHOTO: FILE


ISLAMABAD: Though the previous Pakistan Muslim League-Nawaz (PML-N) government claimed to have brought about improvement in power production, it still passed on a gigantic circular debt of Rs1.148 trillion to the new government of Pakistan Tehreek-e-Insaf (PTI), which faces a bumpy road ahead.

The PML-N had come up with a slogan in 2013 that it would bring load-shedding to an end during its five-year tenure. It solely focused on setting up thermal power plants to increase electricity production, but failed to streamline and upgrade the transmission and distribution network, which could not bear the load of additional power generation.

Of late, the circular debt has become a mammoth challenge for all governments, including the Pakistan Peoples Party (PPP), which ran the government from 2008-13. The situation is no different for the new government which will have to deal with a debt burden of over Rs1 trillion.


In a meeting of the Senate special committee on circular debt on Friday, officials of the Ministry of Energy (Power Division) revealed that out of the total circular debt, Power Holding Private Limited (PHPL) had borrowed Rs582.86 billion whereas Rs566 billion was borrowed to cover receivables of power distribution companies.


The meeting, chaired by Senator Shibli Faraz, was informed that PHPL was to pay Rs153 billion in annual interest on the loans.


The Power Division had also requested the power-sector regulator to include the amount in consumer tariff, but the National Electric Power Regulatory Authority (Nepra) dismissed the plea. Nepra argued that the loans were not part of the development budget and were acquired for smoothly running the distribution companies.


The committee was told that the power sector was to receive Rs817.5 billion from private and government clients. On the other hand, power consumers were paying Rs159 billion on account of taxes in electricity bills.




It was revealed that the Central Power Purchasing Agency (CPPA) was receiving Rs66 billion out of the Rs100 billion charged in electricity bills.


During the meeting, the committee chairman and Senator Musaddik Malik traded allegations.


Faraz held the PML-N government responsible for the mess in power sector, to which Malik responded by saying he would walk out if his opinion was not heard. The committee chairman told Malik that he was disturbing environment of the meeting.


Malik argued that it was not possible to stop theft without installing smart meters, adding the loan offered by the Asian Development Bank (ADB) for the purpose had some drawbacks.


He emphasised that the government would have to bring improvement and efficiency in those power distribution companies where theft and losses stood quite high.




The committee noted that the circular debt would rise further after the production of electricity by new plants. Responding to that, Power Division officials said the government would have to enforce load-shedding in areas where losses and theft were high.


Published in The Express Tribune, August 18th, 2018.

SOURCE:

EXPRESS NEWS

https://tribune.com.pk/story/1783395/2-circular-debt-rs1-1tr-passed-new-govt/