Circular debt in Pakistan goes up by 66%

Aftab Ahmed

Islamabad: Circular debt in Pakistan that has jumped up 66.8 percent during the present government of PTI due to failure of handling affairs of energy companies.

There have been changes in ministry of energy as there are new faces now to put the house in order. However, circular debt continues rising in Pakistan.

Energy Ministry informed Cabinet Committee on energy (CCoE) that circular debt would reach Rs 2.48 trillion in ongoing financial year 2020-21 that stood at Rs 1.61 trillion in 2018-19, registering an increase of Rs 870 billion during the last couple of years.

However, energy ministry claims that the circular debt built up in Pakistan has dropped by Rs 189 billion during the first ten months of ongoing financial year 2020-21.

However, in total, circular debt would increase to Rs 2.48 trillion by end of ongoing financial year against Rs 2.15 trillion in 2019-20.

The total circular debt stood at Rs 2.41 trillion till April this year against Rs 2.3 trillion in January this year which means that it continues rising in Pakistan despite the measures energy ministry has taken so far.

However, ministry claims that the major portion of circular built up amounts to over Rs 100 billion due to unpaid and unbudgeted subsidies.

The government had not paid subsidies and also volume of subsidies also exceeded compared to budged amount.

The losses and inefficiencies of power distribution companies stand at Rs 21 billion. The circular debt built up has dropped by Rs 189 billion in Pakistan during July to April against the same period last year.

After a meeting of cabinet committee on energy, Minister for Planning Asad Umar in a tweet claimed that built up of circular debt is Rs 260 billion in July-April 202-21 compared to Rs 449 billion during the same period last year.

He said that reduction in circular debt has been the result of sustained hard work, analytical data based decision making and willingness of Pakistan to break the nexus between decision makers and powerful elite.

Government has also projected a built up in circular debt by Rs 70 billion during May-June 2020-21.The total built up of circular debt has been at Rs 330 billion during the entire current financial year. The government has projected a total circular debt of  Rs 2.48 trillion by end of current financial year.

So, this year circular debt’ built up has been projected at Rs 330 billion as compared to 538 last year, registering a decline of Rs 208 billion.

An amount of Rs 208 billion contributes a major portion of previous year adjustment. NEPRA losses calculation are all assumption while the power sector experience seasonality of losses.

Official said government had an amount of Rs 948 billion in PHL.