Circular debt swells to over Rs 300 billion, PAC told

ISLAMABAD (September 02 2010): The Public Accounts Committee was informed on Wednesday that the circular debt has once again swelled to over Rs 300 billion, for which the authorities are seriously considering to charge-sheet Karachi Electric Supply Company (KESC), the biggest defaulter. Secretary, Water and Power, Shahid Rafi, told the PAC that Pakistan Electric Power Company was again in serious trouble, as the circular debt exceeded Rs 300 billion.

The amount is on top of Rs 301 billion which the government parked in a holding company and is paying Rs 40 billion annual interest on it. Practically, the cumulative debt has touched Rs 600 billion-mark, choking the entire electricity generation and distribution system.

“The biggest defaulters should be brought to justice. I am going to request the National Electric Power Regulatory Authority to revoke the KESC licence and charge-sheet it”. He said if the KESC consumers were not paying their bills it was not Pepco’s fault.

The Pepco Managing Director, Tahir Basharat Cheema, said that the KESC owed Rs 49 billion to it. He said Karachi city government, Karachi Water Board and the local bodies owe Rs 21 billion to the KESC but it did not mean that the KESC would not pay its dues.

Tahir said that the Sindh government also owes Rs 26 billion to the Pepco, the AJK government’s arrears stood at Rs 3.2 billion, the military cantonments Rs one billion, the Ministry of Defence Production Rs one billion, KP Rs 1.5 billion, Balochistan government Rs 12 billion and Punjab government was a defaulter of Rs 9.8 billion.

He said last time the Sindh government paid its entire dues in 2003. Balochistan dues were pending for last three years and Punjab and KP bills were pending for last one year. The situation has reached such a point where common people are paying their electricity dues and the governments were not paying anything. The Secretary Water and Power said that Karachi Electric Supply Company and the Sindh government were not paying to the Pepco and the Pepco in return was unable to pay to oil marketing and refinery and gas companies.

The Pepco receivables stood at Rs 130 billion and its payables amounts to Rs 175 billion. Due to circular debt after two months the National Engineering Services Pakistan would not be in position to pay staff salaries and may have to lay off 467 employees, said its Managing Director.

He said till June 30, the government owed Rs 3.2 billion to Nespak. Only Wapda owed Rs 650 million to Nespak. The MD said that the Wapda and Earthquake Rehabilitation and Reconstruction Authority has withheld legitimate payments of the consultancy provider. The ERRA owed Rs 877 million to the Nespak.

The Pepco MD said that the KP government has got restraining orders from the court and paying utility bills on 2008 tariffs, as 60 percent increase in tariffs since 2008 was not applicable to the KP citizens. Only on this account the KP government owed Rs 14.2 billion to the Pepco. He said the federal government promised to give Rs 131 billion at the forum of Energy Summit held in April last but it only paid Rs 50 billion.

“It’s astonishing that federal and the provincial governments are litigating against each other. If the matter is not resolved then the Water and Power Ministry should take it to Council of Common Interests”, said Zahid Hamid, a former law minister.

The MD Pepco said that the electricity theft was endemic and last year the authorities arrested 1.3 million electricity thieves. He said the average line losses amounted to 20.3 percent and 4 percent were because of administrative mismanagement. One percent line loss amounts to Rs 6.6 billion in monetary terms. The highest line losses are reported in KESC and the Hyderabad Electric Supply Company at 36 percent – Brecorder