Circular debt to reach Rs2.8tr in next four months, NA panel told

[Norwegian]

Circular debt to reach Rs2.8tr in next four months, NA panel told

Circular debt was recorded at Rs2.3tr in December 2020, as compared to Rs1.1tr in June 2018
By
Shahzad Paracha

ISLAMABAD: The National Assembly’s Standing Committee on Finance and Revenue was informed on Tuesday that the country’s circular debt would surge to Rs2,805 billion in the next four months of the current fiscal year.
The additional secretary of the Power Division, while briefing the meeting about the sector-wise circular debt, stated that the debt was recorded at Rs2,303 billion till December 2020, as compared to Rs1,126 billion in June 2018.
“We are expecting Rs117 billion line losses due to the bad performance of DISCOs, while the government will also have to give another Rs190 billion subsidy to electricity consumers,” the additional secretary said. “Line losses were recorded at 18.3pc in June 2018 as compared to 17.8pc in December 2020.”
He said that NEPRA had recently approved a Rs3.34 increase in electricity price, but the price of electricity was only increased by Rs1.95. Tariff for consumers of up to 300 units was Rs10.20, whereas the same for commercial consumers was Rs20.70 per unit, he added.
He further informed the committee that a circular debt management plan would soon be submitted to the cabinet, adding that strategies were being devised to reduce technical losses and improve recovery.
The additional secretary stated that electricity tariff for lifeline consumers has also been enhanced to 100pc, and that the government would determine the electricity tariff on the basis of production cost.
The committee expressed grave concerns with regard to increasing circular debt and directed the Power Division to present a comprehensive draft in this regard before the NA panel.
The committee members were of the view that an increase in circular debt would create huge problems for the economy, especially industries. The committee lamented Rs55 billion monthly increase in circular debt, declaring it an alarming situation for the country.

 

[Norwegian]

“We are expecting Rs117 billion line losses due to the bad performance of DISCOs, while the government will also have to give another Rs190 billion subsidy to electricity consumers,” the additional secretary said.

Mashallah. What a great electricity system in Pakistan.
@ziaulislam @Patriot forever @Black.Mamba

 

[TheSnakeEatingMarkhur]

Mashallah. What a great electricity system in Pakistan.
@ziaulislam @Patriot forever @Black.Mamba

We need overhaul of electricity system in Pakistan... DISCO doesnt even have a secure website what else can be expected..?

 

[VCheng]

Mashallah. What a great electricity system in Pakistan.
@ziaulislam @Patriot forever @Black.Mamba

It's only about 17.5 billion dollars, which could be manageable in the overall scheme of things. However, its continuous rise should be arrested and even reversed, if possible.

 

[Norwegian]

It's only about 17.5 billion dollars

Only

 

[VCheng]

Only View attachment 719676View attachment 719677

I must admit that the wisdom of paying for capacity rather than production escapes me.

 

[Patriot forever]

Mashallah. What a great electricity system in Pakistan.
@ziaulislam @Patriot forever @Black.Mamba

We have a severe crisis and it will only get worse unless we renegotiate the contracts, especially CPEC ones (they will contribute the most to circular debt in coming years).

The only good thing is line losses have improved just a little bit in DISCO's . Nepra allows up to 15% in tariff rationalization above that adds to circular debt. (Just on part of DISCO's ). Our generation is expensive (due to contracts) on top of it any idle capacity ( capacity utilization less than 92%) also adds up to circular debt.

We are in a fix right now as contracts are legally binding and it will be extremely difficult to fight them off in international courts, we will definitely loose.

One solution I can think of in the short term is government should buy out the IPP's, but the problem is due to attractive contracts no one will be willing to sell them to the government, or the amount will be too high. (The contracts are worth more value than the actual infrastructure).

A perfect heist to siphon off the country for a generation, and no one is willing to hold the responsible accountable.

 

[Norwegian]

I must admit that the wisdom of paying for capacity rather than production escapes me.

You were expecting wisdom from this donkey who signed Cpec IPP contract?

We have a severe crisis and it will only get worse unless we renegotiate the contracts, especially CPEC ones (they will contribute the most to circular debt in coming years).

Nah we don't renegotiate gifts from China @beijingwalker @TaiShang

CPEC a gift from China to Pakistan: PM Nawaz | The Express Tribune

China waited for PML-N rule before making CPEC investment, claims PM Nawaz Sharif

tribune.com.pk

'CPEC is not a gift': Professor Jia Yu at the CPEC 2018 Summit

Both public and private sectors must take ownership of the opportunities.

www.dawn.com

A perfect heist to siphon off the country for a generation, and no one is willing to hold the responsible accountable.

Well we sent the responsible abroad

 

[maithil]

Only View attachment 719676View attachment 719677

Capacity payments are increasing almost exponentially!! Don't think they will see any reduction as more and more power plants are being built. What could be the rationale behind building capacity almost twice of requirement and then agreeing to huge capacity charges.

 

[Norwegian]

What could be the rationale behind building capacity almost twice of requirement and then agreeing to huge capacity charges.

Only Noonies can explain this since they defend Cpec contracts like crazy
@Muhammad Omar @Mav3rick @muhammadhafeezmalik @syedtalhamaududi

 

[Bilal.]

I must admit that the wisdom of paying for capacity rather than production escapes me.

It’s to do with the structure of our power sector. Since there is one exclusive buyer (government) from these power plants. They have to give guarantee that the power plant being sought will be paid for it’s full capacity. They are now trying to bring power market place with multiple buyers and renegotiate the contracts to pay for used power.

I just hope that the timelines are met and the matter is not delayed even by a day.

 

[Norwegian]

They are now trying to bring power market place with multiple buyers and renegotiate the contracts to pay for used power.

That's the question. Why are they doing this now? Why aren't previous govts in jail for not doing it?

 

[dbc]

Pakistan electricity prices, December 2023 | GlobalPetrolPrices.com

Pakistan, December 2023: The price of electricity for households is PKR 0.000 per kWh or USD per kWh. This includes all components of the electricity bill such as the cost of power, distribution and taxes. For comparison, the average price of electricity in the world for that period is USD...

www.globalpetrolprices.com

https://openknowledge.worldbank.org/bitstream/handle/10986/30923/9781464811548.pdf

 

[Bilal.]

That's the question. Why are they doing this now? Why aren't previous govts in jail for not doing it?

Yes. But what’s done is done. I am not very happy with the pace things are moving now. The plan is identified, we need to roll it out quickly. The 1996-2005 IPPs (48 entities) contract was supposed to be signed in January. Last we heard was it’s in final stages and then the news disappeared. Same way by now government IPP contracts should have been restructured. On the matter the closure of captive power plants, no progress being reported. Same on DISCO privatization. Closure of old inefficient GENCOs is the same. When I see the economic and ultimately much larger strategic threat this mess is posing and then I see the urgency on which it is being resolved, I see a huge mismatch to say the least.

 

[Chhatrapati]

@Norwegian Your household tariff is one of the cheapest in the region, why people are complaining it's high?