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Thread: Power sectors circular debt piles up again

  1. #1
    Senior Member Wattan's Avatar
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    Aug 2012
    Pakistan Pakistan

    Power sectors circular debt piles up again

    LAHORE, Dec 11: The unpaid bills of power companies have again piled up to a precarious level of Rs216 billion in less than six months after the Nawaz Sharif government had settled the previous overdue bills of both the public and private electricity producers and their fuel suppliers for the pre-March 2013 period.

    While clearing chunk of the unpaid bills of the power companies at the end of June and the remaining in early July, Finance Minister Ishaq Dar had vowed never to let what is commonly known as circular debt to rise again. The unprecedented step that pushed the budget deficit to 8.2pc of GDP last fiscal, he had claimed, would ease power shortages.

    The government has continuously brandished what it calls as its first major policy achievement without acknowledging the resurgence of the debt during the early months of its own tenure.

    In all the government had cleared the unpaid bills of the public and private power companies and their fuel suppliers to the tune of Rs480bn through cash payment of over Rs322bn just before the close of the last fiscal, and non-cash settlement of above Rs138bn in the first few weeks of the current financial year.

    According to independent power producers (IPPs) sources, the government had initially continued to make partial payments to them against their bills for the post-March period. Even these partial payments have been stopped for some time now, a frustrated executive of an IPP said. The payment of previous bills accumulated under the previous set-up was the right steps in the right direction but it was wrong to assume that it would resolve all the chronic power troubles for ever.He said the IPPs could invoke sovereign guarantees if the government did not take steps to pay their bills over the next few weeks if not days. The last time the IPPs had invoked sovereign guarantees to pay off their creditors and suppliers, the size of their unpaid bills was far smaller than its current level, he warned.

    The IPPs blame the governments failure to cut the transmission and distribution inefficiencies and losses and theft amounting to one-third of the countrys total power productions, delayed increase in the electricity price, poor recovery of the unpaid bills of more than Rs500bn from defaulting consumers, etc. for the rapid growth in their unpaid bills.

    Another IPP executive said the government was holding up overdue payments to the power companies to meet the revenue targets given by the International Monetary Fund (IMF).

    Unless the government realises the gravity of the situation for future supply of electricity and starts clearing the bills, it is going to become a major problem for it going forward, he said.

    According to the details of the unpaid bills of the power companies accumulated since April provided by the IPPs, the government owes Rs56.73bn to Gencos (public sector power generation firms), Rs3.77bn to Chashma Power; Rs3.48bn to hydel plants, Rs44.45bn to the IPPS (set up under the 2002 power policy), and Rs108.10bn to the IPPs (established under the 1994 policy).

    The chief executive of a major private power company insisted the government must immediately get out of the power business by selling the public sector generation and distribution companies if it wanted to fix the collapsing power sector. You cannot hope to bring about improvements in the power sector or attract investment in new generation capacity unless the market forces are allowed to play their role.

  2. #2
    Member cb4's Avatar
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    Apr 2014
    Pakistan Pakistan

    Power sectors receivables rise to Rs556bn

    LAHORE: The dues to be received by the power sector increased by Rs44 billion in the first two months of the current fiscal -- an average addition of over Rs700 million a day -- raising the total tally to a staggering Rs556bn.

    According to figures released by the Pakistan Electric Power Company (Pepco), the sector started the fiscal with the arrears of Rs512bn, which rose to Rs556bn by the end of August.

    During July and Aug, it issued bills of Rs216.691bn but could recover only Rs173.65bn -- thus adding over Rs44bn to the tally.

    Know more: Disastrous situation in power sector: Discos suffer Rs211bn loss

    According to power sector experts, the most unpardonable feature of the current receivables is private default or dues not paid by private subscribers. It indicates the sectors inability to recover bills from influential individuals.

    Of the Rs556bn, the private default amounts to Rs384.605bn. Of the total accumulation of around Rs44bn, Rs30bn come from the private default.

    During the two months, the sector issued bills of Rs183.98bn to the private sector but could recover only Rs155.042bn.

    This is criminal, to say the least, says a former head of Pepco. It speaks volumes about the sectors inefficiency and incompetence of those managing it.

    There may be some justification for official default because government departments receive funds slowly and pay their bills in small instalments.

    The power distribution companies find it difficult to cut off supply to government offices. But this is not the case with private consumers, which face immediate disconnection if they fail to pay bills.

    According to the data, the Sindh government is the single largest defaulter as it has to pay dues of Rs59bn, which increased from Rs56bn in July to Rs59.48bn by the end of August.

    The Federally Administered Tribal Areas fall second with Rs36bn dues and the Karachi Electric follows closely behind with Rs32.78bn arrears, with Rs4bn dues of the two months.

    The Khyber Pakhtunkhwa government falls next in line with Rs20bn default. The total arrears of the Azad Jammu and Kashmir government, including official and private default, stand at Rs40.55bn.

    July and Aug were also months when complaints of gross overbilling were common, which were found true, says a former head of the National Transmission and Dispatch Company (NTDC).

    Almost all distribution companies issued inflated bills to consumers and are now facing inquiry for overbilling to the tune of Rs70bn.

    If the Rs70bn are added to the tally of fresh accumulation, the total default would be over Rs100bn during the two months.

    The entire sector had gone berserk as far as management was concerned, the former chief of the NTDC said. The heads of all important companies are vulnerable to whims of the political leadership because they have been posted on ad hoc basis.

    He said the heads of the remaining companies were frequently changed to keep everyone off balance.

    Under the circumstances, he said, such accumulation of arrears was a natural outcome of the present policies.

    Published in Dawn, October 15th, 2014

  3. #3
    Member saeed1000's Avatar
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    Oct 2014
    Pakistan Pakistan

    Equalization surcharge deprives power consumers of Rs 27b subsidy

    ISLAMABAD: The already entangled electricity consumers, with the exception of those of K-Electric, have been deprived of Rs27 billion annual subsidy with the withdrawal of Rs1.50 per unit subsidy.

    According to reports, the Ministry of Water and Power has imposed Electricity Equalization Surcharge of Rs1.50 per to cut down subsidy being offfered on electrcity.

    Although the National Electric Power Regulatory Authority (NEPRA) had proposed Rs1.50 reduction in the electricity tariff, the Water and Power Ministry blocked the relief by imposing a new surcharge.

    The Electricity Equalization Surcharge has been made applicable with effect from October 1 and it will remain imposed till July 31, 2015. According to the spokesman of the ministry, the notification to this effect has been issued.

    He claimed that the power consumers would have to face no impact as the NEPRAs proposed reduction in power tariff of Rs1.50 per unit and the same amount of Electricity Equalization Surcharge will cancel out each other.

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