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Power sector circular debt tops Rs2.64tr

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1 year ago

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  • Mounting debt becomes major concern for government.
  • Debt increases Rs394bn from July 2022 to May 2023.
  • It rises despite tariff hike of Rs7.9 per unit in July 2022.

ISLAMABAD: The power sector circular debt has reached a staggering amount of Rs2.646 trillion by the end of May 2023, registering an increase of Rs394 billion from July 2022 to May 2023, according to a report by the Ministry of Energy.

The mounting debt has become a major concern for the government and power sector policymakers, as it indicates monthly inefficiencies in the energy system, particularly in generation and distribution, resulting in an additional burden of Rs35.82 billion ($132.2 million) each month.

This comes despite the government’s implementation of a base tariff increase for electricity last July, following pressure from the International Monetary Fund (IMF), which demanded tariff measures to reduce the debt, rejecting the notion of bridging the gaps in power holding companies.

Despite a significant tariff hike of Rs7.9 per unit in July 2022, the circular debt continued to rise, as underlying structural issues in the sector remained unaddressed, leading to a substantial financial burden on loyal power consumers, amounting to billions of rupees every month.

The data reveals that the cumulative debt volume stood at Rs2.253 trillion by the end of the fiscal year 2021-22, which ballooned to Rs2.646 trillion by the end of May 2023.

Meanwhile, payables to power producers surged by Rs420 billion to Rs1.771 trillion during these 11 months. The state-owned generation companies (GENCOs) also saw their payables to fuel suppliers rise from Rs101 billion to Rs110 billion during the same period.

However, a positive development was observed in the amount of debt parked in Power Holding Limited (PHL), which decreased by Rs35 billion to Rs765 billion from the previous figure of Rs800 billion recorded at the end of June 2022.

The inefficiencies of power distribution companies (DISCOs) have emerged as a significant burden on the financial health of the power sector, primarily due to their high losses and low bill recoveries.

These shortcomings in power transmission and distribution are impeding the sustainable provision of energy services, resulting in elevated energy prices and amplified business costs.

During the eleven-month period, the power distribution companies (DISCOs) incurred losses and inefficiencies, along with non-recoveries of bills, contributing Rs374 billion to the circular debt, accounting for 95% of the total addition of Rs394 billion to the overall debt stock.

DISCOs’ losses and inefficiencies amounted to Rs125 billion, while low bill recoveries added Rs249 billion during July-May 2022-23.

The breakdown of circular debt additions further shows that Rs87 billion was attributed to the payment of interest to power producers on delayed payments, with the government currently owing Rs1.77 trillion to these generators.

Additionally, Rs58 billion was added to the circular debt due to interest payments to banks on the Rs765 billion parked in a power holding company.

To address this issue, the government has imposed a debt servicing surcharge of Rs3.23 per unit, passing on the cost of inefficiency to power consumers.

Furthermore, Rs171 billion was included in the circular debt due to delays in the recovery of generation costs through quarterly and monthly fuel charges adjustments. An additional Rs57 billion was added to the debt stock due to non-payment by K-Electric.

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With its second-largest surge ever, PSX approaches 114,000 points.

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2 days ago

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Driven by renewed activity from both private and government financial institutions, the Pakistan Stock Exchange (PSX) saw its second-largest rally in history on Monday.

The market regained many important levels in a single trading session as it rose with previously unheard-of momentum.

Intraday trading saw a top increase of 4,676 points, and the PSX’s benchmark KSE-100 Index gained 4,411 points to settle at 113,924 points. This impressive rebound demonstrated significant investor confidence by reestablishing the 100,000, 111,000, 112,000, and 113,000-point levels.

The market also saw the 114,000-point limit reestablished during the trading session.

The positive tendency was reflected when the market’s heavyweight shares touched its upper circuits. Among the most busiest trading sessions in recent memory, an astounding 85.78 billion shares worth a total of Rs55 billion were exchanged.

Experts credited the spike to heightened institutional investor activity and hope for macroeconomic recovery. Considered a major market recovery, the rally demonstrated the market’s tenacity and development potential.

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In interbank trade, the Pakistani rupee beats the US dollar.

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1 week ago

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In the international exchange market, the US dollar has continued to weaken in relation to the Pakistani rupee.

The dollar fell to Rs278.10 from Rs278.17 at the beginning of interbank trading, according to currency dealers, a seven paisa loss.

In the meantime, there was a lot of turbulence in the stock market, but it recovered and moved into the positive zone. The KSE-100 index recovered momentum and reached 116,000 points after soaring 1,300 points.

Both currency and stock market swings, according to analysts, are a reflection of ongoing market adjustments and economic uncertainty.

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Phase II of CPEC: China-Pakistan Partnership Enters a New Era

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1 week ago

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The cornerstone of economic cooperation between the two brothers and all-weather friends is still the China-Pakistan Economic Corridor, the initiative’s flagship project.

In contrast to reports of a slowdown, recent events indicate a renewed vigour and strategic emphasis on pushing the second phase of CPEC, known as CPEC Phase-2, according to the Ministry of Planning, Development, and Special Initiatives.

According to the statement, this crucial stage seeks to reshape the foundation of bilateral ties via increased cooperation, cutting-edge technology transfer, and revolutionary socioeconomic initiatives.

Planning Minister Ahsan Iqbal is leading Pakistan’s participation in a number of high-profile gatherings in China, such as the 3rd Forum on China-Indian Ocean Region Development Cooperation in Kunming and the High-Level Seminar on CPEC-2 in Beijing.

His involvement demonstrates Pakistan’s commitment to reviving CPEC, resolving outstanding concerns, and developing a strong phase-2 roadmap that considers both countries’ long-term prosperity.

At the core of these interactions is China’s steadfast determination to turn CPEC into a strategic alliance that promotes development, progress, and connectivity.

Instead of being marginalised, CPEC is developing into a multifaceted framework with five main thematic corridors: the Opening-Up/Regional Connectivity Corridor, the Innovation Corridor, the Green Corridor, the Growth Corridor, and the Livelihood-Enhancing Corridor.

With the help of projects like these, the two countries will fortify their partnership, and CPEC phase-2 will become a model of global economic integration and collaboration that benefits not just China and Pakistan but the entire region.

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