Circular Debt Increases by Rs. 139 Billion During First 4 Months of FY22

The monthly circular debt stood at Rs. 35 billion as it reached Rs. 139 billion within the first four months (July to October) of the current fiscal year 2021-2022.

The overall stocks of the circular debt reached new highs to Rs. 2,419 billion on account of flows and stocks until the end of October 2021.

The figures were brought forward to the Cabinet Committee on Energy (CCOE), which met under the Chairmanship of Federal Minister for Planning, Development, and Special Initiatives, Asad Umar.

In wake of arising difficulties in the country, the accumulated circular debt is reported to remain for the remaining tenure of the PTI regime.

In 2017-18, during the tenure of the PML(N), accumulated circular debt reached Rs. 450 billion. By the end of the fiscal year 2020, this amount rose to Rs. 538 billion and was Rs. 130 billion by 2021.

The Circular Debt Management Plan (CDMP), developed under the IMF’s conditions, aimed towards reducing the circular debt to zero every month before the COVID-19 pandemic. A later consensus within the government realized that the flow of circular debt could not be brought down to zero. Practically, the flow of circular debt could only be reduced to less than Rs. 10 billion per month.

The datasheet of circular debt indicates the total payable to power producers at Rs. 1,420 billion, GENCOs payables to fuel suppliers at Rs. 91 billion, and amount parked to Power Holding Company at Rs. 908 billion. Consequently, the total outstanding balance of the Circular Debt touches Rs 2,419 billion.

Unbudgeted subsidy for AJK and KE also increased the Circular Debt by Rs. 75 billion.

As of June 2021, Rs. 292 billion as receivables are pending from KE, as a result of a subsidy dispute between KE and the Government of Pakistan.

A repayment of Rs. 130 billion PHL debt was also estimated by the Power Holding Company and IPPs stocks as adjustments/payments through the federal budget, along with a settlement of outstanding arrears of Rs. 427 billion to IPPs in FY 2022.

The Circular Debt Report of October 2021 was also reviewed by the CCoE as submitted by the Power Division. The sustained decrease in the accumulation of Circular Debt was noted by the committee and their efforts were appreciated. The improved performance of the electricity distribution was also noted, given the sector faced numerous issues due to a decrease in dues collection. To ensure the sustainability of the sector, the government has been releasing the budget subsidy amount as planned and will continue to do so.

The meeting was also attended by the Minister for Finance, Minister for Energy, Minister for Maritime Affairs, Advisor to the Prime Minister on Commerce and Industries, Chairman OGRA, Chairman NEPRA, among other notable representatives of regulatory authorities, and senior officials of Ministries/Divisions.

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