Energy SAPM Tabish Gauhar says that the government has a Debt Management Plan to tackle circular debt, and has predicted that without its implementation it will lead to circular debt doubling to Rs 4.6 trillion in the two years to 2023, from the present Rs 2.3 trillion. He also mentioned that the circular debt had been Rs 1.1 trillion when the PTI took office. He has mentioned as a consequence that tariffs would have to be hiked, clearly implying that the coming hike, of Rs 4.50 per unit, will only cover current debt stock, not future debt.
Though he mentioned such steps as getting a longer tenure for Chinese IPP debt and reducing capacity payments, the real prongs of the Plan will be reduction in line losses by achieving efficiency in the distribution companies, from the existing 17.8 percent to 15.3 percent, as well as improving bill recovery from the current 90 percent to 95 percent by June 2023. How exactly this will be achieved, when the government has not done much in the first half of its tenure, has not been made clear. There are two problems: first, the Plan contains no new suggestions, only ideas which were around when the government took office; second, the Plan has been drafted with World Bank help, so as to get back on the IMF’s EFF, which means the government does not have ownership of it. This lack of commitment is the most worrisome, for it means that the government would probably be satisfied to let the problem fester.
However, that it cannot do. It is likelier than not that the problem will blow up in its face in an election year. It can expect pressure from the countries where the IPPs attracted investment over the capacity payments, quite apart from continuing IMF pressure on this issue. Mr Gauhar has said that the Prime Minister does not want to raise tariffs any further. It is creditable that he does not, but this issue must be treated with the seriousness it deserves if it is not to destroy the nation’s entire economy.
