Return of the Circular Debt
For the last few years, the circular debt was considered a major bane for the economy. Under the PPP government there were strong protests in parliament and on the street against frequent and prolonged power outages that were caused by the liquidity-starved power plants producing less electricity than their installed capacity. Many breathed a sigh of relief therefore when Finance Minister Ishaq Dar triumphantly announced that the government had paid off the Rs480 billion circular debt lock, stock and barrel. Months later Khurram Dastgir Khan informed the National Assembly that a comprehensive plan had been prepared to permanently deal with the issue. Last week Dar counted the deal with the IMF and the settlement of circular debt as top achievements of the PML-N government.
If there ever was a ‘comprehensive plan to permanently deal with the issue’ it was either not put into action or it failed to produce the results. Within the first four months of the current fiscal year, circular debt swelled to Rs211 billion. Early this month there were reports of the unpaid bills of power companies having again piled up to a precarious level. We now hear of a staggering Rs445bn of receivables owed to electricity distribution companies across the country. The major chunk of Rs325bn receivables is due from the private sector whereas the government organisations have failed to pay Rs120bn to the electricity companies. The inability to make the government organizations to pay their dues is an outstanding example of bad governance. The Lahore Electricity Supply Company (LESCO) has reportedly a whopping Rs43bn outstanding, Rs38bn against the private sector and Rs5bn against government organizations. While other provinces are generally considered by the PML-N to be having weak administrations, the Punjab government is presented as the acme of efficiency and the rule of law. How come it failed to persuade or coerce government departments to fulfill their obligations?
The major chunk of receivables is due from the private sector, mollycoddled by the business friendly PML-N. It is understood that most of the business community pays their bills regularly and only a few hundred default. Allowing a small section of the community to bury the power producing companies under the weight of hefty overdues goes against the long term interests of the business community itself. Political expediency that reportedly stands in the way of the administration to help realize the dues must not be allowed to once again create the phenomenon of circular debts.