Islamabad: The government has rejected the proposal to reduce electricity tariff by Rs 4 per unit to reduce the circular debt of Rs 1.8 thousand billion.
The government has reduced the electricity rate by only 60 paisa per unit by terminating agreements with five IPPs a few days ago. The Power Division has suggested that the circular debt of Rs 1.8 thousand billion of IPPs can be repaid by issuing five-year Pakistan Investment Bonds or Islamic Bonds at a fixed interest rate.
According to sources, this loan has been proposed to be taken by the federal government, which the Finance Ministry has not agreed to. The debt servicing surcharge will be reduced by Rs 3.80 per unit with the end of the circular debt.
The government has collected Rs 335 billion from the public last year at the rate of Rs 3.23 per unit, the burden of which has fallen on the public due to non-payment of loans on time.
The total circular debt of the energy sector is Rs 2.4 trillion, of which Rs 1.8 trillion is interest, of which Rs 520 billion is to be paid to government power plants, which are not paid interest on late payments.
The Power Division says that the interest rate is very high, which needs to be reduced by issuing Pakistan Investment Bonds, thus reducing the price of electricity by at least 89 paise per unit, while the Finance Ministry says that the main reason for circular debt is problems like line losses and low recoveries, until these are resolved, a sustainable solution to circular debt is not possible.
During the last fiscal year, a loss of Rs 591 billion was incurred due to power theft and low recoveries, which is likely to increase to Rs 637 billion this year.
