Water and Power Ministry, in its summary obtained from Finance Ministry, claimed that the GoP was committed to pursuing a far-reaching reform programme for the power sector and to help meet the country's future power needs. The Ministry argued that as the power sector requires significant amount of resources to meet the requirements its ability to attract commercial capital needs to be ensured through relevant policy and regulatory actions. It is in this context that Ministry of Water & Power has proposed "tariff policy guidelines" to strike a balance between the interests of consumers and the interests of providers of capital. These guidelines also make an attempt to enhance predictability and financial viability orientation in the tariff setting process in the sector. Lastly, the guidelines also tried to facilitate the growth of competition in all segments of the electricity industry. The policy guidelines were approved by ECC on January 28, 2014.
The objective of the "National Power Tariff and Subsidy Policy guidelines 2014" was to state the intent of the Government of Pakistan with respect to electricity pricing and cost allocation so that policymakers, planners, companies, regulators, and customers have a concrete picture of the steps necessary to achieve a sustainable power sector for the country.
The issue of build-up of circular debt and its management was included under clause "G" of the policy guidelines. Audits (flow and regulatory) have already been initiated to determine the bulk and head of the circular debt. In order to bring more clarity to the clause "G" of the policy guidelines, the following is proposed to be added in the same;
"The Circular Debt is the amount of cash shortfall within the Central Power Purchasing Agency (CPPA), which it cannot pay to power supply companies. The overdue amount is a result of: (a) the difference between the actual cost and the tariff determined by National Electric Power Regulatory Authority (NEPRA) which is the Distribution Company's loss over and collections under that allowed by NEPRA, (b) the delayed or non-payment of subsidies by government, and (c) delayed determination and notification of tariffs. It is the government's policy to reduce, limit to a certain amount which would be reduced over time, and eliminate the causes of the circular Debt."
As in the National Power Policy 2013, the elimination of circular debt would require (i) reducing losses and increasing collections of Discos, (ii) reducing costs of power generation by improving efficiency and diversifying away from expensive fuels, and (iii) notifying cost recovery tariff to customers on a timely basis. The mechanism to manage circular debt will be based and revised on circular debt audits, the sources continued. Finance Division in consultation with Ministry of Water & Power and other stakeholders will oversee a mechanism, which will be introduced by June 30, 2014, to fulfil this policy.