KARACHI – The circular debt of the energy sector has been hovering around Rs180 billion that has crippled the financial health of entities operating in this field.
The federal government attempted to tackle this crisis by floating the Term Finance Certificates and also formed a banking consortium, but the debt issued continued to undermine this sector that could make the companies engaged in this business unviable.
The President, Petroleum Marketing Business of Byco Kalim A Siddiqui has disclosed this critical nature of the energy companies in his brief chat with journalists in Karachi on Thursday. The government is a major defaulter in the circular debt accounting for more than Rs 140 billion in the shape of price differential and non-payment of utility bills, he said. The ability of energy companies to cope with this crisis is getting worse with the passage of time.
He said that the energy debt has been prevailing in the country several years, but it has been aggravated in recent times after the government introduced the price differential framework. A strong political will and good governance were essential to eliminate the debt issue, he said. The formula of price differential, sky-touching line losses (about 40 percent), subsidy to FATA/non-payment of bills, outdated power plants, low efficiency and generation of high cost of electricity have dragged this sector into an unending financial crisis.
The oil refineries were the key victims of the circular debt dilemma as they had to import fuel for the domestic consumption and to maintain 21 days strategic reserves, Kalim added. He said that the Federally Administered Tribal Areas (FATA) were inflicting a tremendous loss of Rs 80 billion a year in due to the subsidy on the supply of the electricity and non-payment of the bills.
He pointed out that oil refineries were running at 60-65 percent due to the debt crisis and in order to avoid more losses. The refineries should be facilitated in enhancing their production capacity to the highest possible level so that imports can be reduced leading to a decrease in the drain of foreign exchange and congestion at ports, he added.
The line losses in Pakistan were the highest in the world. The average line losses around the world were about 5-7 percent, but in Pakistan this ratio was 40 percent out of which the share of the theft of electricity remained around 32 percent, Siddiqui said. He also was of the opinion that international crude oil prices could surge further from the current level of $93 dollars a barrel that would further augment price hike and aggravate the energy debt and crisis.
In the past, he said the resources of generating cheaper electricity like nuclear, wind, solar, coal and hydel, have been neglected that ultimately landed the country and energy sector into serious trouble. “With nuclear technology we can generate one unit of electricity for only 80 paisas as against the current thermal rate of 8-14 rupees a unit,” Kalim Siddiqui said.
About 15 years ago China gave Chashma Nuclear Power Plant to Pakistan and similar options could have been explored to produce inexpensive electricity, he said. Giving a way out of the current crisis, he said that lines losses should be brought to the affordable level, low-cost electricity should be produced, efficiency should be increased in the generation and transmission system, hydel and alternative energy sources should be explored instead of buying the world’s most expensive electricity from the rental power plants.
Talking about Byco Petroleum he said that his company would expand the number of petrol pumps by between 50 to 100 by June, 2011. Currently the company was running 163 petrol pumps throughout the country and the Azad Kashmir. He said the company would eliminate the culture of long-queues at the petrol pumps and also provide quality fuel to gain an advantage over competitors.
