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Power sector circular debt tops Rs2.64tr

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  • Mounting debt becomes major concern for government.
  • Debt increases Rs394bn from July 2022 to May 2023.
  • It rises despite tariff hike of Rs7.9 per unit in July 2022.

ISLAMABAD: The power sector circular debt has reached a staggering amount of Rs2.646 trillion by the end of May 2023, registering an increase of Rs394 billion from July 2022 to May 2023, according to a report by the Ministry of Energy.

The mounting debt has become a major concern for the government and power sector policymakers, as it indicates monthly inefficiencies in the energy system, particularly in generation and distribution, resulting in an additional burden of Rs35.82 billion ($132.2 million) each month.

This comes despite the government’s implementation of a base tariff increase for electricity last July, following pressure from the International Monetary Fund (IMF), which demanded tariff measures to reduce the debt, rejecting the notion of bridging the gaps in power holding companies.

Despite a significant tariff hike of Rs7.9 per unit in July 2022, the circular debt continued to rise, as underlying structural issues in the sector remained unaddressed, leading to a substantial financial burden on loyal power consumers, amounting to billions of rupees every month.

The data reveals that the cumulative debt volume stood at Rs2.253 trillion by the end of the fiscal year 2021-22, which ballooned to Rs2.646 trillion by the end of May 2023.

Meanwhile, payables to power producers surged by Rs420 billion to Rs1.771 trillion during these 11 months. The state-owned generation companies (GENCOs) also saw their payables to fuel suppliers rise from Rs101 billion to Rs110 billion during the same period.

However, a positive development was observed in the amount of debt parked in Power Holding Limited (PHL), which decreased by Rs35 billion to Rs765 billion from the previous figure of Rs800 billion recorded at the end of June 2022.

The inefficiencies of power distribution companies (DISCOs) have emerged as a significant burden on the financial health of the power sector, primarily due to their high losses and low bill recoveries.

These shortcomings in power transmission and distribution are impeding the sustainable provision of energy services, resulting in elevated energy prices and amplified business costs.

During the eleven-month period, the power distribution companies (DISCOs) incurred losses and inefficiencies, along with non-recoveries of bills, contributing Rs374 billion to the circular debt, accounting for 95% of the total addition of Rs394 billion to the overall debt stock.

DISCOs’ losses and inefficiencies amounted to Rs125 billion, while low bill recoveries added Rs249 billion during July-May 2022-23.

The breakdown of circular debt additions further shows that Rs87 billion was attributed to the payment of interest to power producers on delayed payments, with the government currently owing Rs1.77 trillion to these generators.

Additionally, Rs58 billion was added to the circular debt due to interest payments to banks on the Rs765 billion parked in a power holding company.

To address this issue, the government has imposed a debt servicing surcharge of Rs3.23 per unit, passing on the cost of inefficiency to power consumers.

Furthermore, Rs171 billion was included in the circular debt due to delays in the recovery of generation costs through quarterly and monthly fuel charges adjustments. An additional Rs57 billion was added to the debt stock due to non-payment by K-Electric.

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April FDI in Pakistan increased to $358.8 million, according to SBP

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The inflow for April was $358.8 million, up 177% from $132 million in April FY23. Still, that was 39% more than the $258 million from March.

China was the largest investor, with $439.3 million in FDI from the nation between July and April of FY24—the greatest amount—as opposed to $604 million during the same period of FY23. In April, China accounted for $177 million of the total investment.

With $51.93 and 51.89 million invested in Pakistan, the United Arab Emirates and Canada came in second and third, respectively.

The power industry was the main draw for foreign investors in FY24, which ran from July to April. This period’s FDI in the power industry was $637.5 million, compared to $776.2 million the previous year. From $338 million to $460 million this year, Hydel Power garnered more attention.

Continue reading: In FY23–24, Pakistan’s per capita income increased to $1680.

According to a separate data released on Wednesday, Pakistanis’ per capita income increased to $1680 in FY2023–2024.

The size of the national economy grew from $341 billion to $375 billion in the current fiscal year, according to figures made public by PBS.

Throughout this fiscal year, Pakistanis’ yearly per capita income increased by Rs 90,534; the monthly rise was Rs 7,544.

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OGRA forbids the purchase or sale of inferior LPG cylinders.

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The 313 LPG marketing and 19 cylinder-producing companies received notices from the OGRA, which described the act of refilling inferior LPGO cylinders as harmful.

Avoid supplying LPG to unlicensed distributors, the OGRA has cautioned LPG marketing companies. Only approved distributors will be able to sell and buy LPG going forward, per the notification, which states that new SOPs have been developed for the LPG industry.

Additionally, the warning said that the decision was made in an effort to preserve both lives and the business in response to an increase in cylinder blast occurrences.

Price reductions of Rs 20 per kilogramme for liquefied petroleum gas (LPG) were implemented in Quetta on May 3.

There is a reduction of Rs 20 on LPG prices, which means that the price per kilogramme drops from Rs 280 to Rs 260.

The costs of LPG were reduced by Rs 20 per kilogramme earlier, bringing the total decrease to Rs 40 per kilogramme over a few weeks. This is something worth noticing.

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PIA announces a significant student discount.

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According to an airline spokesman, the national flag carrier has recently raised the baggage allowance to 60 kg.

Currently, PIA flies one flight per week on Sundays between Islamabad and Beijing.

The discount may be useful to students who intend to spend their summer vacations in Pakistan or who wish to return home after earning their degrees.

Before, students who wanted to visit China could now receive a 27% reduction on their fares through PIA.

On Eid ul Fitr, the national flag airline also reduced the cost of domestic flights by 20% for both economy and executive economy classes.

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