The real power crisis
It was only a matter of time before the power crisis – consistently worsening during Ramzan – ran into ‘circular debt’ headlines. PML-N has had good reason to muddy the waters all these years. The uncomfortable, and unmentioned, fact is that you can set up all the power plants you like, capable of producing as many megawatts as you might wish, but they won’t produce an ounce of electricity if nobody pays their bills. And that, unfortunately, is the great fraud of this electoral cycle. Remember how PML-N wiped clean almost Rs500b of circular debt in one (unaudited) payment back in June ’13? And wonder why it’s back up past the Rs400b mark again?
The government’s decision to borrow another Rs41b – through commercial banks, of course – will no doubt give IPPs just enough elbow room to produce a little more electricity but it will also come with a steep price.
One, there’s the admission that it was the debt, after all, that kept supply well below demand and the ruling party has been lying about the real reasons for the shortfall. The country still has, and has had for years, enough production capacity. It’s just that production becomes near impossible when payments (for the production) never come in.
Two, notice that the government will borrow from commercial banks? In an environment when its daily, non-productive, borrowing has already largely crowded out the private sector, the Rs41b will lessen the Ramzan humiliation a bit, etc., but it will cut deep into private investment. Good luck with that around election time.
And three, a loan is a loan, after all. And borrowing form one source – which will have to be paid back, with extra – to balance an equation elsewhere is, by definition, a short term exercise. What does the ruling party plan to do when this lease, too, runs out and there’s yet more to pay for? Eventually they will just add to the debt burden without doing much for the power crisis. But now that the circular debt cat is, once again, out of the bag, perhaps someone should ask the government about its obsession with more, bigger power plants when the real problem lies elsewhere.
