Govt clears 480bn circular debt

ISLAMABAD: The government completed on Monday a non-cash transaction of Rs138 billion through book adjustments to clear energy sector’s circular debt.

“A sanction order of Rs138bn has been issued. In total, Rs480bn circular debt, including Rs342bn payments made last month, stands cleared,” said Finance Ministry’s adviser and spokesman Rana Assad Amin. The circular debt stood at Rs503bn on May 31.

The adviser told Dawn that a partly sum of Rs23bn related to cases filed by independent power producers (IPPs) in the Supreme Court was now outstanding.

He said the IPPs had agreed to withdraw cases and resolve the dispute through arbitration envisaged under the power-purchase agreements as part of a deal with PML-N government for payment of outstanding dues.

They had filed applications to withdraw cases and hopefully the court would dispose of the matter in the next hearing.

The finance ministry’s spokesman said the IPPs had also fulfilled their commitment to increase their generation by more than 1700MW after the agreement with the government last month.

As a result, average electricity generation has gone beyond 14,000MW compared with less than 12,000MW about two months back, leading to reduction in electricity shortfall to about 3,000MW also contributed by higher hydropower generation and reduced power demand.

He said that the government had made a total disbursement of Rs342bn last month, including through government bonds and about Rs20bn had returned to the government in the form of dividend on account of government shareholding in public sector companies, resulting a net disbursement of Rs322bn.

Responding to a question, the adviser said the Rs138bn worth of transaction did not involve any bond or cash payment but through adjustment of payables against receivables of the generation companies, Wapda and National Transmission and Despatch Company (NTDC). Giving an example, he said the Wapda had to pay Rs85bn to the government while its dues against the government stood at about Rs90bn which had been settled through book adjustment.

He said the finance minister had announced in his budget speech to clear circular debt by mid-August but later decided to resolve the matter ahead of the deadline.

“We have clean slate now as far as past circular debt is concerned,” he said.

Responding to a question, he agreed that about Rs1.5bn electricity dues were accumulating on a daily basis that would be addressed on approval of the energy policy by the Council of Common Interests (CCI) hopefully on Tuesday.

The circular debt adjustments have not gone well with President Asif Ali Zardari whose spokesman Farhatullah Babar questioned transparency of the transaction.