PTI government successfully brings down circular debt of power sector by 68%

Low payments by the distribution companies give rise to the low payments to the generators of the electricity.

 

  • PML-N’s strategy added Rs 450bn to the circular debt, the PTI government had previously revealed.
  • The circular debt rate at present is Rs 38bn per month that would be reduced to Rs26bn by the end of the ongoing fiscal month, says Tareen.
  • Crackdown on power theft has recovered 80billion rupees since October last 2018, he further says.

circular

Bearing the fruit of the unprecedented efforts of the incumbent government, the circular debt in the power sector has been reduced by 32% last year to 68% since the PTI government took over. The government is committed to eliminating the circular debt completely by the next financial year, say the officials.

Technically, circular debt is the non-payment by the power purchaser for the generation of electricity. This non-payment can be due to several reasons. These include inefficiency in distribution companies, distribution losses, and theft. Actually, the government provides subsidy to the consumers of electricity. The subsidy that is not performance-based adds to the circular debt crisis.

How circular debt rises?

Low payments by the distribution companies give rise to the low payments to the generators of the electricity. If electricity generators are underpaid then they’ll neglect to pay their fuel suppliers and exacerbates the circular debt.

The condition of circular debt in Pakistan:

circular_debt
Dealing with Circular Debt – Business Recorder (2018)

The circular debt which was rising by an amount of 38 billion rupees every month is reduced to 26billion rupees. This gruesome amount will further decrease to 8 billion rupees by the end of June 2020 and a consistent plan has been made for timely action and monitoring of debt payments, Jahangir Tareen previously told.

By the end of the next fiscal year, a regular increase in the circular debt that continued to rise in the last three decades will be brought to zero, he added.

What are your views on this? Share with us in the comments bar below.

  • Nice if circular debt reduced by monitoring theft & increased efficiency. Increasing rates should not be the only solution


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