Speaking truth and straight talk distinguishes the Prime Minister Imran Khan from the traditional politicians leading other two mainstreams political parties, small and regional parties. Speaking at the foundation laying function of mother and child hospital at Rawalpindi, the Prime Minister expressed concern over the high price spiral and attributed it to the recent inevitable fiscal measures of hiking electricity and gas tariffs and petroleum products prices. He minced no words about the legacy of economic crisis left by the two previous governments in the shape of Rs. 1300 billion circular debts in power sector and Rs. 150 billion in gas sector in addition to unsustainable public debt running into thousands of billion rupees. He said the government would have either exercised the dangerous option of leaving the debt burden to increase further or raise the prices of utilities.
Out the entire amount of circular debt Rs. 300 billion has been accrued by electricity bills default and Rs. 1000 billions has been piled up by non-payment of 40 percent idle capacity charges to IPPs and Chinese Power Companies as per purchase agreements made by PPP and PML-N governments against the national interest. Power distribution companies have issued a list of 45000 defaulters who owe Rs. 1000000 or more to these companies. The receivables of Quetta Electric Supply Company have risen to over Rs. 211 billion followed by Sukkar Electric Supply Company with Rs. 59.28 billion, Peshawar Electric Supply Company Rs. 13.19 billion; Tribal Electric Supply Company with Rs. 4.72 billion and Hyderabad Electric Supply Company with Rs 730 million.
The outstanding electricity bills arrears against government departments can be recovered at source deductions from their budgetary allocation through the mechanism of federal adjuster in the Finance Ministry. Likewise, power sector receivables from the private influential consumers can be recovered through administrative actions.
Frequent electricity tariff hikes will not wipe out 78 percent burden of circular debt which is recurrently created by non-payment of idle capacity charges to IPPs. Former Chief Justice of Pakistan Mian Saqib Nisar had taken suo motu notice in January on excessive payments being made to these power producers. The last PML-N government struck shady agreements with Chinese Power Companies for coal based thermal and hydropower generation, utterly neglecting the interest of the country and its people. Capital Expenditure (Capex) for the coal projects was 40 percent higher than the international cost. The agreed coal power tariff was 8.4 cents per unit as compared to reasonable tariff of 5 cents or below which is in vogue in other countries. The previous government had decided to create a revolving fund in the banking system for the advance payment to the Chinese thermal power companies. Now the non-payment of tariff bills to Power China has resulted in suspension of electricity generation from the coal fired plants of Port Qasim Electric Power Company.
The hydropower projects which are being completed by Chinese under CPEC will alarmingly raise the power tariff in future, further compounding the problem of circular debt. A comparative data of different projects shows that per unit cost vary widely. Karot has 2.03 times more the reference cost agreed for Dasu hydropower project, Kohala 3.31 times, Azad Pattan 3.97 times, Suki Kinari 2.38 times and Mahal 2.50 times.
The country needs energy but at a competitive cost that can be affordable and make country’s exports competitive in the overseas markets. The PTI government appears helpless to renegotiate the power purchase agreement to achieve these goals. Production of exportable goods has gone down and the over all growth rate in the industrial sector is 1.4 percent in the current fiscal year. If subsidy in power tariff is withdrawn from export products industry then situation in the manufacturing sector will get worse. Legal or negotiated solutions can provide a way-out of quagmire of circular debt and tariff hikes.
