ISLAMABAD – International Financial Institutions (IFI) have again advised the government to introduce professional management in power sector entities to curtail the burgeoning circular debt in the power sector, official sources revealed.
The government had dissolved the board of directors of all the power distribution, generation and transmission companies on November 22. However, installation of new boards has been delayed for the previous 40 days; this delay has perturbed donors, sources revealed.
The circular debt has ballooned to over Rs 200 billion despite the fact that the government had already transferred Rs 300 billion debt incurred by the power sector to a debt holding company, Power Holding Company Limited to clear the balance sheets of the power sector companies. The 15-year repayment plan requires an annual distribution of Rs 50 billion from the budget.
The monthly increase in the power tariff has neither restricted nor curtailed circular debt. According to informed sources, the introduction of professional management at the distribution and transmission companies, rationalisation of the power tariff, commitment of gas supply to power generation and the curbing of massive power theft could generate savings amounting to Rs 150 billion annually.
The power tariff based on new slabs will help generate Rs 25 billion per annum, while use of gas for power generation instead of furnace oil would help save Rs 15 billion per year. Hypothetically, curbing the massive power theft of over 20 percent in QESCO, HESCO and PESCO by a mere 2.5 percent could help save up to Rs 20 billion per annum. Improvement of the transmission and distribution network could help save an additional sum of Rs 10 billion per anum.
The immediate release of KESC, provincial governments and departments would help clear Rs 60 billion dues of power sector entities. Sources said even with a success rate of 50 percent on proposed reforms, the circular debt could fall quite sharply.
