Circular debt reaches Rs 2.3 trillion
ISLAMABAD: The caretaker government, frustrated by persistent circular debt and line losses, is actively considering two potential strategies. These strategies involve either privatizing both power generation companies (Gencos) and distribution companies (Discos) or granting management control to private entities for a duration of 20 to 25 years.
The shift in policy direction is prompted by the escalating circular debt crisis in the power sector, now at Rs2.3 trillion, threatening sector sustainability. As a result, the government is reducing direct involvement in business operations.
Circular debt in the gas sector exceeds that of the power sector, totaling Rs2.8 trillion. The government is considering transferring four power generation plants and 10 state-run distribution companies to private entities under long-term concession agreements, allowing for investment and infrastructure enhancements.
The options include transferring power distribution companies to provincial governments, complete privatization, or delegating management through long-term agreements. Uniform tariffs may no longer be mandatory after privatization.
Regarding gas, the government plans to raise tariffs, impacting low-income and affluent consumers differently. The government will honor international agreements with independent power producers.
Strategies for reducing circular debt include cost reduction, loan extensions, boosting local power generation, and upgrading transmission lines. The gas sector faces annual losses of Rs350 billion.
Imported gas reliance is growing, with a disparity between procurement and selling prices contributing to gas sector circular debt.
