Under the plan committed with the IMF, the power sector was to get an additional financial injection of Rs2.650 trillion in two years. Wikimedia Commons/File
ISLAMABAD: Reduction in circular debt as committed with the International Monetary Fund (IMF) and the World Bank is unlikely to materialise due to unrealistic subsidy allocations at the outset of the two-year circular debt management plan (CDMP), according to the power division.
The power division had protested in writing over inadequate budgetary allocations for debt servicing of power sector loans parked in the Power Holding Private Limited (PHPL), payments to independent power plants and overall tariff differential subsidies for budget year 2021-22, a senior official at the power division told
Govt to buy out 11 IPPs to avoid Rs450b capacity payments
Top Story
April 28, 2021
ISLAMABAD: The federal cabinet Tuesday decided to buy out 11 IPPs based on furnace oil (FO) at discounted value of Rs150-200 billion to avert payments of their capacity charges of Rs450 billion that it is bound pay in remaining seven years of their contracts.
This is how the government can tackle the issue of capacity payment charges an important component of Circular Debt to some extent. The outstanding amount the government is to pay to all IPPs in the head of capacity payments for the current year stand at Rs900 billion which will increase to Rs1500 billion in 2023.
Govt to buy out 11 IPPs to avoid Rs450 bn capacity payments
Top Story
April 28, 2021
ISLAMABAD: The federal cabinet Tuesday decided to buy out 11 IPPs based on furnace oil (FO) at discounted value of Rs150-200 billion to avert payments of their capacity charges of Rs450 billion that it is bound pay in remaining seven years of their contracts.
This is how the government can tackle the issue of capacity payment charges an important component of Circular Debt to some extent. The outstanding amount the government is to pay to all IPPs in the head of capacity payments for the current year stand at Rs900 billion which will increase to Rs1500 billion in 2023.
Minister says time of essence to reduce circular debt
Business
April 17, 2021
ISLAMABAD: The unaffordable cost of electricity generation, circular debt build-up and leakages in the transmission system made the power sector financially challenging, finance minister said on Friday.
The newly-appointed energy minister Hammad Azhar directed the officials to follow a structured approach for timely completion of envisaged reforms.
“Time is of essence for reduction in circular debt, upgradation in transmission and distribution infrastructure and improved service delivery in the power sector,” Azhar told a meeting to review progress on reforms in the power sector. “Facilitating the common man is the top priority for the government.”
The politics of circular debt
Any management solution without addressing intricate political dimensions is not going to work
The writer is a public policy expert and an honorary Fellow of Consortium for Development Policy Research. He tweets @hasaankhawar
Circular debt is more of a political challenge than a management problem. The stock of circular debt has grown five times over the last eight years. From Rs450 billion in FY2013, it is expected to reach Rs2.3 trillion by June 2021. The flow of circular debt touched Rs538 billion last year, exceeding the federal PSDP of Rs533 billion, though very recently this flow has slightly slowed down due to increase in tariffs.