National Electric Power Regulatory Authority (NEPRA) has told the Prime Minister in a presentation that power sector circular debt is increasing at an alarming rate of Rs.40-42 billion per month and has jumped to Rs.1.93 trillion, including the last fiscal year increase of Rs.492 billion. The regulator has called for imposing national power emergency to de-accelerate fast piling of the debt. It merits mention that Power Division had claimed to have brought down the month-on-month increase in circular debt to Rs.10-12 billion and this liability shall be cleared by December this year.
The regulator has suggested few urgent measures to stem the pace of surge in the circular debt. These include ban on Employees Trade Union of power sector, handing over collection of bills to private sector and closure of inefficient thermal power plants.
NEPRA red alert has come at a time when government has freezed further increase in tariff for all categories of consumers and has fixed it at 7 cents per unit for zero rated export industries. The measures suggested by the regulator may not substantially bring down the circular debt keeping in view the capacity payment charges for 9 diesels and furnace oil run and two LNG fired thermal power plants, which are owned by private sector. The share of inefficient public sector thermal power plants in energy mix is very small. Diesel and furnace oil fired thermal power plants had been set up in the second PPP government and the ones run by LNG have been set up by the last PML-N government. Shady power purchase agreements were made, allowing highly inflated tariff indexed with the US dollar plus 40 percent idle plant capacity payment charges. Hence consumers pay bills for the electricity which is not actually generated and inducted in the national grid. Ironically, the present government is reaping the bad harvest of the agreements in power sector made by the previous governments about which people must be taken into confidence by telling the Nitti Gritty of these agreements.
Privitisation of electricity bills collection may not bring the desired improvement in the power sector receivables. The running defaulters include influential political and business elite, government departments and public sector organisations. Privitisation of electricity bills collection will further add to the woes of consumers who regularly pay their monthly utility bills.
Electricity stealing by domestic, commercial and industrial consumers is another major factor of power sector crisis. Prime Minister has ordered across-the-board action against the powerful electricity pilferers. It remains to be seen how far his directive can be translated into action to effectively curb theft of electricity by through direct hooks and meters tampering.
Faulty power transmission and distribution system contributes in a big way to technical losses and are accounted for in the circular debt. The installed generation capacity of both hydel and thermal power stations is 26,000 megawatt but the rag-tag transmission and distribution system can hardly pick 18,000 megawatt. The technical losses are another addition to the power sector circular debt. Neither the previous governments nor the present one have shown seriousness to address the chronic issue of rising technical losses in the national transmission and distribution system. The Asian Development Bank had sanctioned a loan of $4.5 billion for the system up-gradation in 2016 but it could not be disbursed due to lack of coordination among the relevant ministries to fulfill the required procedural formalities, although commitment chargesof0.5 percent are being paid on this loan.
The recipe of jacking up power tariff has not achieved the intended objective of reducing circular debt. It takes a heavy toll on the economy by abnormally escalating the production cost in the manufacturing sector, making goods uncompetitive both at domestic and in international markets. The solution lies in re-negotiating power purchase agreements, strong action against defaulters and overcoming technical losses in the transmission and distribution system.
