Circular debt swelling

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DESPITE promises, PTI government has failed to fix the longstanding problem of circular debt in power sector.

It has reportedly touched Rs 2300 billion mainly because of indecisiveness on part of authorities concerned.

In February this year, the government had signed revised contracts with 47 Independent Power Producers (IPPs) with the aim to save billions of rupees. Regardless of this initiative, dues of the IPPs are piling up mainly because of non-implementation of these revised contracts.

Authorities concerned are indecisive regarding payment of undisputed payables as ‘First Instalment’ to the IPPs in accordance with the revised Power Purchase Agreement (PPA).

This amount would have to be paid within thirty days after the revised agreement but many months have passed and there is no progress on it.

Since National Accountability Bureau (NAB) had also expressed its satisfaction over the revised contracts, therefore, there should not be any issue on implementation.

The power division must pay the First Instalment to the IPPs as it is only after doing so, the revised terms and conditions of the PPA including lower tariff will come to force and help significantly reduce the flow of circular debt.

We will also urge both Finance Minister Shaukat Tarin and Energy Minister Hammad Azhar to give priority to the settlement of this matter.

Then, circular debt mitigation plan, approved by the Cabinet Committee on Energy, must also be implemented in letter and in spirit to curtail losses and improve recoveries.

This issue of circular debt must be dealt with all seriousness as it poses a major threat to our energy sector and economy.

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