Power sector receivables soar to Rs1.437trn
ISLAMABAD: The power sector receivables have increased by 4.5 per cent from Rs 1.375 trillion to Rs 1.437 trillion during the first two months of FY 2020-21, well-informed sources told Business Recorder.
Of this, the stock of federal government's receivables which was Rs 17 billion as of June 30, 2020 increased to Rs 21 billion, for AJ&K government from Rs 145 billion to Rs 152 billion, Fata, from Rs 38 billion to Rs 40 billion, Agri Balochistan, from Rs 266 billion to Rs 275 billion, KE( Karachi Electric) from Rs 169 billion to Rs 180 billion, provincial governments, from Rs 71 billion to Rs 78 billion, private (Discos) from Rs 664 billion to Rs 688 billion, IPPs, Rs 4 billion.
The sources said, receivables stock which grew Rs 479 billion during 2019-20, has posted a growth of Rs 32 billion in July and Rs 32 billion in August 2020.
Power sector's payables stock has posted a growth of over 4 per cent to Rs 2.237 billion in August from Rs 2.150 trillion. Of this payables of Wapda increased to Rs 219 billion from Rs 208 billion, IPPs to Rs 830 billion from Rs 764 billion, oil unchanged at Rs 72 billion, gas to Rs 91 billion from Rs 81 billion, NTDC to Rs 19 billion from Rs 17 billion, and PHPL( debt service) to Rs 1.006 trillion from Rs 1.007 trillion. Circular debt increased by Rs 57 billion in July and Rs 29 billion in August 2020. During these two months, Discos collection remained at Rs 335.851 trillion against billing of Rs 367.171 trillion, showing average collection of 91.47 per cent.
On September 29, 2020, the recently replaced Prime Minister’s Special Assistant on Power & Coordination of Marketing & Development of Mineral Resources, Shahzad Qasim informed the cabinet the government would be required to increase electricity rates by Rs 6.06 per unit in a bid to clear backlog of circular debt in financial year 2023.
He informed the Cabinet during a very technical presentation that circular debt base case stood at Rs 450 billion in financial year 2018 that went up to Rs 850 billion in financial year 2020.Power Division said that it was expected to rise to Rs 1.6 trillion in financial year 2023.
According to the presentation, the government had funded Rs 177 billion in financial year 2020, injected Rs 125 billion in power sector through tariff increase and Rs 12 billion due to improvement in power distribution companies. It was further revealed that these measures resulted in reducing circular debt base case to Rs 538 billion.
He said government would fund Rs 134 billion, Rs 166 billion through tariff increase and Rs 12 billion following improvement in Discos in financial year 2023.These measures would result in reducing circular debt base case to Rs 1.29 trillion.
The presentation maintained that circular debt would be reduced to Rs 621 billion in 2023 against Rs 1.29 trillion through reforms. The government is currently negotiating with Independent Power Producers (IPPs) to reduce rate of return which would help to reduce circular debt by Rs 87 billion - Rs 69 billion through staggering of new power plants, Rs 9 billion Gencos closure and Rs 160 billion payment by K-Electric.
Shahzad Qasim further stated that it would save Rs 38 billion through elimination of AJ&K subsidized tariff, Rs 108 billion through losses and recovery improvement and Rs 173 billion through conversion of PHPL &old stock to public debt. These measures would result in reducing circular deb to Rs 621 billion and government would require increase in power tariff by Rs 6.06 per unit to clear it in financial year 2023.
Qasim who was replaced with Tabish Gohar, a very close friend of Arif Naqvi of Abraaj Capital which owns 66.4 per cent shares in KE, said that it would move from non-targeted to targeted subsidies in power sector. At present, all consumers using 300 units per month are given subsidies. The government is conducting survey to give targeted subsidy to the deserving consumers. It would also move interest cost from power tariff to public debt which included old stock and PHPL loans.
The government is working on restructuring of power sector and on competitive trading bilateral contracts market (CTBCM), restructuring of power division, restructuring of Discos board and market based appointment of Chief Executive Officers (CEOs) of power sector entities.
During discussion, the cabinet members noted that the presentation was too technical and complex and desired that in future only key issues in easily comprehensible form should be shared. The possibility of lowering the tariff for the industry during winters, to spur consumption of idle capacity, was enquired. Power Division confirmed that work on incentivising consumption during winters was in progress. The members also expressed apprehension that the projected achievement targets were too unrealistic and would eventually burden the consumers. It was also suggested that the plan to use surplus power be implemented through incentivising industry by offering power at subsidized/concessional rates.—MUSHTAQ GHUMMAN