zulfiqar_ali Circular Debt – Why solving this issue is critical for the future of the Energy...

8/2/2019 zulfiqar_ali Circular Debt Why solving this issue is critical for the future of the Energy Sector

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Circular Debt Why solving this issue is critical forthe future of the Energy Sector


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Simply defined, the chain of dues from Power Sector companiesto other companies in the Energy Sector.

Power companies unable to pay fuel costs essentially usingpayables to Fuel Suppliers as a source of working capital

But what is the ultimate source of this circular debt?


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Power sector inefficiency line losses, poor collection,electricity theft

Spiraling fuel costs, notadequately passed through intariffs

Non-payment by Governmententities

But the largest source: Non-payment of Tariff DifferentialClaims


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Circular Debt is a misnomer it isactually a Debt Spiral, withGovernment at its base

Non-payment of Tariff Differential Inability to pass rising costs on to

consumers Non-payment by government

owned entities Inability to enforce collection in

certain areas

Spiral Debt is being created largelydue to fiscal mismanagement andpoor policy


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Total power sector subsidyfor the current yearestimated at over PKR 300billion

Previous years debt stockestimated at a further PKR350 billion

Increasing at a rate of PKR100-150 billion per annum


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Power sector practically insolvent Insufficient investment, constant shortfalls Massive direct and indirect economic losses

No power, no industry, no growth

Constrains development of upstream resources

Ultimately, will lead to loss of grid electricity across the country


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Sustainable and long term solution is necessary Insolvent power sector will lead to economic collapse

Need a complete re-think ofeconomic priorities Fuel sources for power generation Electricity subsidies Priorities for supply of electricity

Bio - Gas plant Surplus coal reserves in Pakistan


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Must move toward an economically viable, long term fuel sourcefor generationFurnace Oil generation must end Long term solution has to be coalShort to medium term: Must allocate additional indigenous gas to

the power sector

Necessary to reduce immediate cost of generation and create somefinancial stability Should help to substantially reduce existing subsidies Necessary to ensure fiscal space for new coal initiatives

CCPP Coal Power Plant


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Sustainable only if: Combined with a detailed and effectively implemented plan for

efficiency improvements in DISCOs and GENCOsTariffs must account fully for LONG TERM COSTS OF SERVICE DISCOs must reduce line losses and improve collections

Require more detailed and better quality data Must implement and maintain new ERP/CRM/EDM platforms

across DISCOs and GENCOs


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Must develop indigenous coal resources as a critical national

priorityThe only viable and economic long term fuel source

Tariffs across the ENERGY sector must reflect costs of service andopportunity

Develop hydro resources where possibleMicro and mini-hydel as well as mega-dams

Off-grid alternative energy solutions for village electrification


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Thank You!

zulfiqar_ali Circular Debt – Why solving this issue is critical for the future of the Energy...

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