"We will present the entire scenario before the Prime Minister and ECC. We will request for release of Rs 106 billion due subsidy and Rs 50 billion loan from the commercial banks already approved by Abbasi-led ECC," said an official.
According to Power Division, a number of issues have contributed towards the build-up which include less than regulatory benchmarked performance (both losses and recovery), non-realization of subsidies, delayed determinations of tariff for end consumers (court stays, quarterly adjustments), and non-payment by provincial governments. Moreover, higher energy sales due to a significant increase in generation base, has also contributed towards further build-up of circular debt.
"Despite improvements in the sector performance, outstanding liabilities of power sector towards sectoral entities, typically referred to as circular debt, increased and touched Rs 596 billion at the end of July 1, 2018," the official added.
The present stock of circular debt is as follows: (i) Gencos- Rs 8 billion;(ii) fuel suppliers - Rs 107 billion;(iii) IPPs- Rs 375 billion;(iv) nuclear power- Rs 20 billion; and (v) Wapda- Rs 84 billion.
IPPs, namely M/s Atlas Power Limited, Hubco- Narowal Project, Liberty Power Tech Ltd, Nishat Chunian Power Ltd, Orient Power Company, and Saif Power Limited have issued notices of payment to the Central Power Purchasing Agency Guaranteed (CPP-G).
The IPPs argue that build-up of massive circular debt and non-payment of international arbitration awards is significantly damaging local and foreign investors'' confidence. This is especially dangerous at a time when massive additional investment is needed in distribution sector.
Under government''s policies, subsidies are given to various categories of consumers. Out of these subsidies, more than Rs 30 billion are cross subsidized within the tariff regime and another Rs 70 billion is collected as surcharge to reduce the burden on the exchequer. Non-cash settlements of subsidies under various heads will clear liabilities of GoP but does not serve the purpose of payments to the service providing entities i.e. PSO, IPPs, NTDC, Wapda and gas companies, etc.
Informed sources told Business Recorder that Power Division was pursuing Finance Division for arrangement of Rs 50 billion from commercial banks to pay off circular debt but the latter was showing reluctance in implementing the ECC decision. However, Power Division now hopes that the new government will arrange funds.
Another official told Business Recorder that Power Division will also give a detailed presentation to the Prime Minister who is also Minister Incharge of Power Division about the current structural, technical and administrative issues.
The Prime Minister will also be briefed about system constraints due to which electricity is not being provided to KPK as per requirements.
In reply to a question, he said that KPK''s feeders are over loaded which is the main reason for the short supply in some areas.
On Tuesday, Peshawar Electric Supply Company (Pesco) utilized 1800 MW against total quota of 2800MW and allocated quota of 2100MW.
"We will request the Prime Minister to allocate funds for the upgradation in transmission and distribution system of KPK," the official continued.