Karachi:Pasban Democratic Party PDP Chairman Altaf Shakoor said here on Saturday said that balooning circular debt is a curse and it could rock the boat of our national economy if not controlled emergency basis.

He said that sadly Pakistan’s power sector is became bankrupt and the real culprit behind this bankruptcy is the government’s own sheet mismanagement. He said the extent of this cruel mismanagement could be gauged from the fact that in 2018, when the PTI formed government at the federal level, the accumulated stock of circular debt stood at Rs1.14 trillion ($9.5 billion).

The current stock of circular debt hovers around Rs2.5 trillion ($14 billion). Growing at the current rate of growth, the power sector’s circular debt is estimated to reach Rs4 trillion by 2025.

He said that the circular debt is a shortfall of payments at the Central Power Purchasing Agency (CPPA). CPPA does not receive the outstanding payment from power distribution companies (DISCOs) due to shortfall in receivables by the state-owned distribution companies (DISCOS) and privatized K-Electric (K-El).

Thus, CPPA does not make payments to other power companies in the supply chain, that is, state-owned generation companies (GENCOs), Independent Power Producers (IPPs) and National Transmission and Dispatch Company (NTDC). GENCOs fail to clear their dues to fuel suppliers. Similarly, IPPs, due to delay in payment from the government could not make payment to the fuel suppliers.

The fuel suppliers, in turn, default on their payment towards refineries and international fuel suppliers. He said since 2007, Rs.5.7 trillion (or USD 35 billion at current exchange rates) have been pumped into the sector as equity adjustments and subsidies. However, it could not contain the curse of the circular debt.

He said this sector needs drastic reforms and the failure to reform this sector means that Pakistan is using scarce resources to prop up a power sector and losing out on the opportunity to invest in human development. The state of affairs is such that Pakistan, a country lagging countries like Rwanda in terms of youth education metrics, is spending more in terms of providing power subsidies than education.

Altaf Shakoor said that at present, energy companies are facing financial constraints and are struggling to get their outstanding dues cleared. Oil and gas sectors are reeling from Rs1.6 trillion worth of circular debt whereas the power sector has a circular debt close to Rs2.5 trillion.

He said the government lacks funds to clear the growing circular debt. It is not efficient enough to stop theft of electricity and it is not eager to waive off all taxes on import of renewable energy equipment and technology.

He said the government is willingly paying billions of rupees as subsidy to private power companies like the KE, but it is not willing to spend a few billion of rupees to subsidize solar panels that can greatly help in reducing pressure of transportation-line electricity.

He said Pakistan as a sunny country can generate huge electricity from solar source, if the government seriously pays attention to this sector and give low-income people incentives to buy and install solar panels. He said industry to manufacture solar panels and other renewal energy gadgets should be set up in Pakistan on urgent basis.

He asked the government to issue special circular debt bonds to generate finds locally and internationally to end the evil cycle of the circular debt for good. He said new agreements should be inked for import of cheaper oil and gas. He said work on lingering gas supply pipeline projects should be restarted with an accelerated pace.

He said the issue of the circular debt is a national threat and all political parties should shun their differences over this issue as this dreadful debt has already become a national emergency.

He said that the new government of Shehbaz Sharif should present a national policy framework to cope with the circular debt before it becomes too late. He said all out resources in this regard should be mobilized besides ensuring a robust financial diplomacy in all friendly countries to secure not only cheaper gas and oil but also to get soft loans to pay the circular debt for once and all.