Ministry of Water and Power claims that circular debt is now hovering around Rs 254 billion due to merit order based generation and Rs 65 billion arranged for PSO and IPPs by the Ministry of Finance - Rs 25 billion released by the Ministry and Rs 40 billion loan arranged - has contributed to a reduction of circular debt.
"If the government had not taken steps, circular debt would have touched Rs 350 billion mark," claimed an official. Power sector receivables have reached Rs 500 billion as of January 31, 2015 but nothing concrete has been done to recover this amount. The IMF staff reportedly snubbed the government's team for its apathy toward receivables' collection.
The sources said, Water and Power Ministry's official presented reports on matters such as managing tariff and subsidy, power sector's performance, accountability and transparency. Ministry of Water and Power, sources said, informed the IMF that the government has already directed National Electric Power Regulatory Authority (Nepra) to determine multi-year tariff for power Distribution Companies (Discos) whereas subsidy policy will be restricted only to lower income group. Presently, higher income group is also enjoying subsidy on power.
The Fund was also informed that the Government has issued guidelines to Nepra to allow actual Transmission and Distribution (T&D) losses to Discos which are around 19 per cent which implies that all inefficiencies of power sector including theft will be passed onto those consumers who regularly pay their bills.
The sources said, average line losses for Discos were 18.6 per cent in 2013-14 but Nepra allowed only 12.82 per cent losses to Discos which are quite unrealistic and cannot be complied with. The IMF has been informed that Nepra is in the process of finalising the tariff for FY 2014-15 and the Government has already conveyed in black and white to the regulator that actual losses should be considered at the time of tariff determination.
According to sources, the IMF was told that Nepra has been directed to impose surcharge on its own so that entire fuel price relief is not passed on to consumers. Nepra was set to hear an FPA petition of Central Power Purchasing Agency (CPPA) on January 29, 2015 but the hearing was put off indefinitely aimed at facilitating talks with the IMF.
Ministry of Water and Power informed the Fund's staff that most of the agreed actions have been completed; however, initiatives taken in four Discos to improve recovery were not implemented. MoW&P instructed (i) Peshawar Electric Supply Company (Pesco), Hyderabad Electric Supply Company (Hesco), Sukkar Electric Power Company (Sepco) and Multan Electric Power Company (Mepco) to outsource to the private sector collection of their respective feeders with losses of 50 per cent or above; (ii) all Discos to implement revenue protection programme that ensures correct billing, reduces losses, in particular theft and improve collections; (iii) Council of Common Interests (CCI) initiated a discussion on a mechanism to automatically adjust the amount of receivables owed by provincial governments and agencies; and (iv) the federal government adjusted receivables of federal agencies or entities to exceed 90 days of billing by Discos.