ISLAMABAD: Pakistan’ energy sector’s circular debt is estimated to have gone beyond a record Rs922 billion mark by end of November 2017.

According to a report submitted to the parliament this week, the Ministry of Finance has put the amount of circular debt at Rs472.678bn as of November 30, 2017.

The report, however, did not explain that another Rs450bn debt was separately parked with Power Holding Private Limited (PHPL) — a subsidiary of the power division — created to raise funds from commercial banks and is financed through surcharges built into the consumer tariff.

Minister of State for Finance Rana Muhammad Afzal Khan reported that the amount of the said circular debt (Rs472.678bn) of the sector payable to power generators, short term in nature, did not appear in annual State Bank report of 2016-17. The report only indicated long-term loans payable by economic groups of domestic and foreign financial institutions.

The finance ministry’s report put the payables to oil and gas sector at Rs103bn, including Rs89.4bn to Pakistan State Oil (PSO). The dues to oil and gas companies had stood at Rs71bn in December 2013.

This is despite the fact the PSO had reported Rs285bn receivables from the power sector earlier this month. This also meant that the federal government’s capping plan three years ago to trim down the circular debt to Rs204bn by mid-2018 was falling apart.

The ministry reported payables to Hub Power Company at Rs70bn in November this year, slightly lower than Rs75bn in 2013. By contrast, the dues to Kot Addu Power Company surged to Rs73bn in November FY18 against Rs41bn in 2013. Likewise, the bills to AES also increased to Rs19bn compared to Rs11bn four years ago.

Including these major companies, total payables to all the independent power producers were reported at Rs288bn this year versus Rs270bn in 2013. Payables to Wapda hydro and others were reported by MoF at Rs52bn this year in contrast to Rs138bn four years ago.

As such, the total fresh flow of circular debt has now reached Rs472bn as of November 30, 2017 after clearance of Rs480bn in 2013, soon after the PML-N came into power.

The finance ministry reported servicing of PHPL debt at Rs17.558bn but did not report the total stock of debt on PHPL books that now stands at about Rs450bn compared to Rs335bn in 2013.

Power Minister Sardar Awais Ahmad Khan Leghari recently conceded that the power sector losses which amounted to about Rs120bn were now estimated at Rs360bn per annum as transmission and distribution losses dropped only 1.2 per cent in four years while the supply increased significantly.

This was despite the fact that the power division had reported to the cabinet committee on energy in August 2017 that overall recoveries had improved to 93pc compared to 88-89pc in 2014. A series of surcharges were imposed over the last four years and oil prices witnessed a historic fall.

The additional costs to consumers included about Rs4.50 per unit through a series of surcharges, like tariff rationalisation and financing cost etc, and about Rs1.50 per unit by withholding notifications on tariffs determined by the regulator 2015-16 onwards.

Published in Dawn, March 2nd, 2018