Senate’s special committee briefed on circular debt

ISLAMABAD: The meeting of the Senate Special Committee on Circular Debt was held on Friday, convened by Senator, Shibli Faraz. The meeting commenced with a briefing by Joint Secretary Zaighan Eshaq Khan. Convenor Committee Senator Shibli Faraz lauded the efforts of the officers and said that they were extremely forthcoming and cooperative during the committee sessions and provided the Committee with all the information that was required to resolve the Circular Debt situation in Pakistan which is increasing rapidly. While briefing the Committee on the Power Holding Company that was established in 2009, Joint Secretary Power Division, Zaigham Eshaq Khan revealed that the Power Holding Company was a special purpose vehicle and was developed with a 15 million Capital. This entity was created to consolidate all loans taken by the Power Sector such as Gencos, Discos, CDP, WAPDA, etc. He revealed that the consolidated amount was worth PKR 216 billion and the liability was from 2004 to 2009. This Company was approved by the Prime Minister’s summary and was created under the Companies Ordinance Act. He further stated that after the first meeting it was revealed that the total mark-up on the consolidated amount including principal amount, overdue amount and total mark-up. Total payment was worth PKR 307.995 billion. This was settled by the Government of Pakistan by issuance of bills and PIDS i.e. the government took this amount in its budget and enhanced its deficit. The current facilities residing within the Power Holding Company amounted to PKR 618 billion but since some of the outstanding amount was paid, the amount was reduced to PKR 582.8 billion, he added. Joint Secretary Power Division Zaigham Eshaq Khan further presented details of all 14 loans and mentioned one that was unique in the sense that instead of the banking sector it was taken from OGDCL. The amount was worth PKR 82 billion. This, he revealed, was the only loan which did not have the Banking Sector involved, due to which the mark-up payment was much lower than the rest. He further stated that all of these were taken to the books of the distribution companies but the request was denied by the regulators on grounds that this was not a developmental loan and hence this cannot be treated as part of the tariff. It was further revealed that the Circular Debt of PHPL amounted to PKR 582.86 billion and the outstanding liability was PKR 566 billion and receivables amounted to PKR 817.5 billion. Convenor Committee Senator Shibli Faraz was of the view that supply of electricity to non-payment areas had doubled Circular Debt. Senator Musadik Malik was of the view that the basic reason for accumulation of Circular Debt was due to a situation when the regulator does not allow you to transfer losses to the consumer in full. The difference between the actual loss and what is allowed to be passed on adds to Circular Debt, he added. He stressed that to make any progress it was imperative that the regulatory mechanism should be changed. Convenor Committee, Senator Shibli Faraz further enquired that since losses from HESCO, IESCO, QESCO and other companies differ and that if NEPRA accepted the rate that is set by DISCOS, would that give respite to the situation. Joint Secretary Power Division Zaigham Eshaq Khan clarified that the rate will increase the indirect impact and would increase the Government of Pakistan’s liability towards the power Sector, due to enhancement of the subsidy level; thus impacting the budget. While discussing the situation in Balochistan Senator Mir Kabeer Ahmed Muhammad Shahi was of the view that the only solution to the electricity problem in Balochistan was solarisation. He said that a total cost of PKR 67 billion was needed to solarise 32000 tube wells in all of Balochistan. This, he asserted, would be a onetime investment after which electricity worth 577 megawatts would be saved. Seconding the views of Senator Shahi, Senator Musadik Malik asserted that solarisation and distributed transmission was the future of the world and for Pakistan to make any progress it was imperative that this be pursued. The meeting was attended by Senator Sikandar Mandhro, Senator Sajjad Hussain Turi, Senator Mir Kabeer Ahmed Muhammad Shahi, Senator Musadik Masood Malik, and senior officers of the Ministry of Finance and Power Division, PEPCO and NTDC. Published in Daily Times, August 18th 2018.