THE country’s power sector has been grappling with a severe issue of circular debt which according to the latest reports has reached an alarming level of Rs 2.646 trillion by the end of May 2023. Piling up of the circular debt regardless of increase in power tariffs in recent months clearly indicates inefficiencies in the energy sector particularly in generation and distribution which is resulting in an additional burden of Rs 35.82 billion each month.
Unfortunately, successive governments did not pay any attention to address this issue except the lip service and now the situation is that it has reached an unsustainable level, warranting immediate and serious measures to avoid further increase in it. Structural issues need to be addressed forthwith. A study by IPS recently recommended that to overcome the issue of circular debt, the most judicial approach requires a thorough audit of all the IPPs, assessment of their profitability, bifurcation of discos and switching over to renewable energy. At present, the government policies and the decisions mostly consider raising power tariffs by decreasing subsidies to curb the circular debt, which have severe after-effects on energy affordability and the fact is that these policies also have not paid off. It will not be wrong to say that the power sector is a complete mess and requires comprehensive and swift governance and policy reforms. Some of these include development of business models to boost renewable energy, liberalisation of the energy market through deregulation and privatization, renegotiations of generation tariffs for independent power producers, segregation and deregulation of the administrative and operational activities of the distribution companies leading towards public-private partnership and implementation of accelerated reforms for modernisation. The sector also requires new investment in the transmission and distribution system and shift to the latest technology to reduce line losses. A major reason for the burden on consumers is the obsolete and less efficient power transmission system; therefore, power transmission must be made an investment priority area, along with energy transition and digitisation. A sustained campaign also needs to be launched to check power pilferage. Those involved in power theft should be given strict punishment without any discrimination. It is the time to take this matter head on as turning back is not a solution. Energy security is a must if we want to move forward on the path of sustainable economic growth.
