PD projects Rs 1.89trillion circular debt in Pakistan by end of FY 2022
Ibn-e-Ameer
Power Division has projected Rs 1.89 trillion circular debt stocks in Pakistan by end of the current financial year 2022.
However, it will decline to the Rs 1.52 trillion mark by end of the next financial year 2023.
In a briefing to the cabinet committee on energy (CCoE), the Power division informed the cabinet body on energy that the Federal Cabinet, on recommendations of the CCOE, had approved the Circular Debt Management Plan (CDMP) in March 2021.
The power division had framed CDMP according to the targets set for the power sector, based on prevailing market conditions including notification of Quarterly Tariff Reduction(QTAS).
The other key factors were rebasing, PKR/USD exchange rate, inflation, applicable fuel prices, and estimated Commercial Operation Date (COD) of upcoming power plants, etc.
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Power Division added that since aligning the circular debt Management Plan (CDMP) in Pakistan with the latest forecast was a continuous process for accurate monitoring, changes with respect to notification of QTAS and annual rebasing occurred.
These changes, along with other factors, had resulted in a divergence of Rs.448 billion in circular debt flow assumptions for FY 2022.
Circular debt stocks projection in Pakistan
Considering these changes in assumptions and to recalibrate the CDMP, the Power Division updated the CDMP with revised Circular debt stocks projections of Rs. 1,890 billion and Rs. 1,526 billion in Pakistan at the end of FY 2022 and FY 2023 respectively.
In the previous CDMP, the government had estimated it to be Rs. 1,442 billion and Rs.1,723 billion respectively.
Power division had also projected the Circular Debt flow before stock payments for FY 2022 and FY 2023 at Rs. 167 billion and Rs.96 billion respectively.
It showed a declining trend with respect to circular debt flow for FY 2019 and before.
Power Division had sought approval of the cabinet body on energy (CCoE) for the revised Circular Debt Management Plan.
During the ensuing discussion, CCoE members pointed out that the proposed plan was variant from the one presented and approved in March 2021 for multiple reasons, including assumptions, rates, and timing of quarterly adjustments.
They also highlighted that the projections were based on the commitments made by the Finance Division for the provision of Rs50+Rs116 billion as supplementary grants during the current financial year. In case of any shortfall, it will change and reflect in the proposed plan.
The CCoE also noted the notification of discounted tariff determinations for IPPs as Nepra had approved.
The Cabinet Committee on Energy (CCOE) considered the summary of “Circular Debt Management Plan – Revision” and approved the proposal.
The Power Division presented monthly circular debt reports for November and December 2021 for information of the cabinet body.
The Cabinet Committee on Energy (CCE) noted the position presented by the Power Division regarding ‘Circular Debt Report for November and December 2021’.
