Circular debt

The government needs to stop the increase

The National Assembly’s Standing Committee on Finance was told by an Additional Secretary of the Power that the even after the circular debt of the power sector would still go up by Rs 436 billion this fiscal year, even after the hike of 15 percent in the consumer tariff, to end at Rs 2.6 trillion. The government should realise that while the tariff hike might have met one of the conditions of the IMF for the resumption of its interrupted International Extended Financing Facility (EFF), its purpose was to help solve the circular debt problem. That the problem has not been solved is an indication that the step may not have been particularly serious.

The government is probably past the point where eliminating circular debt is a possibility. What seems a more realistic target would be to get the circular debt to stop rising any further. Considerations of the effect on the consumer would perhaps not matter so much, more important would perhaps be stopping it from rising any further. The problem that emerged from the Committee hearing seems to be that the much needed reforms of the power sector have not been carried out, such as revamping the distribution network, or reducing line losses, which have been left above levels well above those which the sector’s regulator, NEPRA, has found permissible.

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The PTI government has invested much manpower into the sector, and not only the Finance and Power Ministers, Dr Hafeez Sheikh and Umar Ayub, are involved, but two SAPMs, Nadeem Babar and Tabish Gohar, are also. However, now is the time that the government must go right to the top, and find out who is responsible for a situation where the government is obliged to take a step which has got the consumer screaming, but which does not solve the problem it was meant to. It is time the government realized that the reliance of the country on imported fuel for power generation is not something that can be wafted away, or swept under the carpet, but something which will have to be taken seriously. Apart from raising the tariff, the government also needs to address those administrative issues which have led to the current problem.

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The Editorial Department of Pakistan Today can be contacted at: [email protected]

1 COMMENT

  1. Pakistan’s economy is entangled in circular debt. We have more energy generating capacity but due to the debt, we are unable to utilize that. The additional capacitites have actually become a liability for us. Government should take proper actions to control the debt and pay the dues. A dire need of the time is to revisit our contracts and policies with IPPs.

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