Govt plans to bring down circular debt by Rs425bn in FY22

The Power Division on Friday said it was targeting curtailing circular debt by about Rs425 billion during the current fiscal year (FY22) to Rs1.856 trillion chiefly through Rs230bn prior year recoveries from consumers through base tariff.

In a report on circular debt presented to the Cabinet Committee on Energy (CCoE), the Power Division said the circular debt accumulation during the current year was projected to be Rs400bn mainly because of weaknesses on the part of the power companies and the government. However, this would be brought down to Rs165bn by ensuring Rs230bn prior year recoveries through consumer tariff.

This is part of the latest circular debt management plan currently under process for approval by the CCoE as required under the IMF programme. A meeting of the committee presided over by Planning and Development Minister Asad Umar reviewed the latest situation on Friday.

In addition, the government would take care of the repayment of principle debt parked in Power Holding Limited (PHL) and stock payments of about Rs461bn. The report said circular debt would increase by Rs60bn because of interest charges on delayed payments to independent power producers (IPPs) and Rs32bn mark-up on PHL.