MUSHTAQ GHUMMAN

ISLAMABAD: Power Division revealed Friday that the power sector’s consolidated payables reached Rs 1.148 trillion of which Rs 582.86 billion are loans parked in the books of Power Holding (Private) Limited (PHPL) whereas Rs 566 billion is circular debt.

Presided over by Senator Syed Shibli Faraz Special Committee on circular debt observed that the power sector is totally in a mess and needs the full attention of the government; he proposed privatisation or granting full autonomy.

Joint Secretary (Power Finance), Zargham Eshaq Khan briefed the committee that power sector obtained Rs 582.86 billion loans from a consortium of banks led by National Bank of Pakistan. The government was unable to pay off principal amount of loans due to which these loans were rolled over. The mark-up payment on these loans is being collected from consumers through surcharge at the rate of Rs 0.43 per unit. PHPL has paid Rs 32 billion interest on these loans so far whereas Rs 153 billion mark-up is still pending. He said PHPL did not pay full mark-up payment on Rs 82 billion loan obtained from OGDCL through TFCs which is Kibor plus six basis points.

He further stated that interest payment of Rs 180 billion loan obtained for the power sector is being made by the Finance Division as Nepra has not included it in the tariff so far.

“We have shown all the loans in the books of Discos taken on behalf of Government of Pakistan, seeking imposition of surcharge but the regulator has turned down our requests on multiple occasions, saying that these are not developmental loans,” he added.

Zargham Eshaq Khan further informed the committee that the amount of power sector’s receivables stood at Rs 817.5 billion.

The Convener of Special Committee raised questions on the rates at which loans were obtained from banks, adding that the interest rate on loans taken on GoP guarantee should have been relatively lower compared to the rate at which the government took these loans. This question shocked officials who had negotiated with the banks at higher interest rates.

He further stated that balance sheets of all companies do not match each other, asking for formulation of integrated system which could show the entire debt, receivables, payables and mark-up payments as debts are not reflected accurately.

Talking about use of power by the industry or commercial sector, Syed Shibli Faraz said that energy consumption by these two sectors is only 20 per cent which means industry has either shifted to its own sources or is simply not functioning.

Abid Latif Lodhi, Chief Executive Officer (CEO), Central Power Purchasing Agency Guaranteed (CPPA-G) disclosed that he is receiving 66 per cent of total billing which implies 34 per cent is going into circular debt. He added that a cost of Rs 219 billion is still disputed.

The committee convener expressed his annoyance at the Power Division officials for supplying electricity to those consumers who are not paying their bills which has increased circular debt by Rs 150 billion.

Power Division’s officials clarified that this decision was taken by Abbasi-led government in October last.

Senator Musadak Malik, former caretaker Minister for Water and Power, said the committee has to differentiate between costs of providing electricity versus not having electricity. He said the former government resolved generation issue but issues in distribution system still exist. He argued view that a solution of this problem can be found either through privatisation or other mechanism to make companies competitive. He further stated that Discos ‘balances sheets are not reconciled,’ adding that even the most profitable companies fudge their balance sheets.

During discussion on power sector issues Senator Shibli Faraz and Senator Musadak Malik clashed.

“If you (convener) do not want to hear me and provide me an opportunity to express my views, I will leave the meeting,” said Malik.

Senator Shibli Faraz said that “You ( Musadak Malik) are disrespecting the committee because you have to attend another meeting”. Musadak Malik denied this and other committee members calmed the two men down.

The committee discussed the Sales Tax refunds, which are not being cleared by the Revenue Division.

Secretary Finance, Arif Ahmad Khan acknowledged that refunds have not been paid to the power sector due to financial constraints.

The committee also discussed issues of agri-tubewells in Balochistan and recommended that tubewells be solarized in the province. A senator from Balochistan suggested that farmers should also be provided drip irrigation system so that water is saved.

Joint Secretary (Power Finance) maintained that electricity should be treated as a commodity and be provided to only those who pay bills.

Wrapping up the meeting, Senator Shibli Faraz advised Secretary Power Division to improve performance of Discos either through privatisation or any other mechanism so that issue of circular debt is settled.