According to sources close to the caretaker minister for Power and Petroleum, the circular debt in the country’s power sector has reportedly reached Rs 2.551 trillion during the first six months of the 2023-24 fiscal year (July- December). This represents a growth of 10.5 percent in the monthly flow, equivalent to Rs 40 billion in total terms.
Sources indicate that the circular debt in the power sector, which stood at Rs 2.310 trillion by the end of the 2023-24 fiscal year, has now risen to approximately Rs 2.551 trillion. This represents an increase of Rs 241 billion, compared to the growth of Rs 283 billion observed during the same period in 2022-23.
During the first six months of the current fiscal year, payables to power producers have risen from Rs 1.434 trillion to Rs 1.673 trillion, reflecting an additional amount of Rs 239 billion. The outstanding payables to Independent Power Producers (IPPs) were Rs 1.673 trillion during the corresponding period of the fiscal year 2022-23.
According to sources, the amount of debt owed by Genco to fuel suppliers has increased by Rs 14 billion, reaching Rs 112 billion during the current fiscal year (2023-24). This is compared to Rs 98 billion during the same period in the previous fiscal year (2022-23). However, there has been no change for Rs 765 billion held in Power Holding Limited (PHL).
The sources attribute the significant growth in circular debt to various factors, including issues with K-Electric (KE), the release of subsidies, delays in implementing QTA adjustments, higher interest payments, and fluctuations in the dollar exchange rate. The International Monetary Fund (IMF) has urged the authorities to implement tariff adjustments as per the regulator’s notification.
As of December 2023, KE owes Rs 336.4 billion, and the Economic Coordination Committee (ECC) recently approved Rs 50 billion for KE’s QTA, which was used by CPPA-G to settle its liabilities.
During the first six months of the current fiscal year, the budgeted but unreleased subsidies amounted to Rs 10 billion, compared to Rs 82 billion in the same period of the previous fiscal year. There were no unclaimed subsidies during the first half of the current fiscal year, despite Rs 70 billion remaining unclaimed in 2022-23 and Rs 17 billion during July-December 2022-23.
The interest charges for Independent Power Producers (IPPs), including PHL, amounted to Rs 58 billion during the first six months of the current fiscal year, compared to Rs 85 billion in the same period of the previous fiscal year. The total interest charges for IPPs in the entire fiscal year 2022-23 were Rs 143 billion.
The pending generation cost, including QTAs (Qualified Technical Agreements) and FCAs (Fuel Cost Adjustments), stood at Rs 187 billion, compared to Rs 118 billion during the same period of the previous fiscal year and Rs 250 billion for the entire fiscal year 2022-23.
Non-payment by K-Electric amounted to Rs 9 billion during July-December 2023-24, compared to Rs 91 billion during the same period of the previous fiscal year.
The sources also mentioned that the losses and inefficiency of Distribution Companies (Discos) amounted to Rs 77 billion during July-December 2023-24, compared to Rs 62 billion in the same period of the previous fiscal year. This resulted in an increase of Rs 15 billion in the total circular debt stock. The total losses and inefficiency of Discos were Rs 160 billion during the fiscal year 2022-23.
Discos’ under-recoveries reached Rs 149 billion during the first half of 2023-24, compared to Rs 62 billion during the corresponding period of the previous fiscal year. However, their cumulative under-recoveries stood at Rs 236 billion as of June 30, 2023. Other adjustments, such as prior year recoveries, amounted to Rs 74 billion during July-December 2023-24, compared to Rs 246 billion in the same period of the previous fiscal year.
The cumulative financial impact of interest charges, pending generation cost, non-payment by K-Electric, Discos’ losses/inefficiency, and Discos’ under-recoveries amounted to Rs 378 billion during the first half of the current fiscal year, compared to Rs 318 billion during the same period of the previous fiscal year and Rs 220 billion for the entire fiscal year 2022-23.
Furthermore, payables to power producers increased by Rs 5 billion due to withdrawals by the Federal Board of Revenue (FBR) in April 2023.
