IMF report endorses improved power supply, reduction in losses, containment of circular debt

IMF report endorses improved power supply, reduction in losses, containment of circular debt

ISLAMABAD, Oct 14 (APP): The International Monitory Fund (IMF) in its report on Pakistan economy endorsed Ministry of Water and Power efforts in improving electricity supply, reducing outages, decrease in line losses and containment of circular debt by efficient payments backed by improved recoveries.

According to IMF report “concerted efforts to further
strengthen DISCOs’ performance have continued to contain the accumulation of new arrears in the power sector.

The end June 2016 Indication Target (IT) on the accumulation of power sector arrears was met with a large margin, reflecting favorable oil prices, strengthening in DISCOs’ payments collection and a reduction in distribution losses, said a press release issued here on Friday.

The IMF report further appreciated the Ministry of Water and
Power efforts in enforcing the policies to meet the targets given to the Power Distribution Companies (DISCOs’).

The report says “In particular, most DISCOs’ met their quarterly performance targets in terms of collection and distribution losses at end June 2016. With this, there was no new accumulation of arrears in the fourth quarter of FY 2016/17 and the stock of outstanding arrears declined

It may be noted that the circular debt which was increasing at the rate of Rs.11 to 16 billion per month and around 200 billion per year has been effectively managed by the Ministry of Water and Power. There was only a marginal increase of Rs.8 billion in circular debt for the year 2016 as compared to Rs. 200 billion in preceding years.

No power sector losses have paid off from the Federal Budget in Financial Year 2014 15 and 2015 16 in Lieu of power sector as compared to Rs. 342 billion and Rs. 138 billion paid in financial years 2012 13 and 2013 14 from federal budget respectively.

It may be added the untiring efforts of government to increase the bill recoveries and lower the line losses have been instrumental in this regard.

The overall recoveries of the power sector stand at 94.3% as compared to 88% in 2013. Similarly the overall Technical and Distribution losses have been curtailed and a decrease of 1.1% from 19% to 17.9% has been achieved. Both the increase in recoveries and decrease in line losses translate into direct cash benefit of Rs.60 billion rupees to the power sector.

It is further to added that the Aggregate Technical and
Commercial Losses in Pakistan’s Power sector have come down to 22.46% from 27.52%.

The power sector losses which were funded via budgetary
subsidies has witnessed a steep decline. The power sector losses paid out of the Federal Budget has come down from 342 billion in 2012 13 to zero since last two years i.e.2014 15 and 2015 16.

Due to improved financial health of the power sector, the PSO has received 126% payments against its invoices showing an extra 61 billion payments, while the IPPs received 104% against its invoices and the Gas companies received 104% payments in year 2016. Maximum power generation in 2016 reached to 17350 MW.

Improved financial health and smooth payment mechanism has not only encouraged the existing IPPs to contribute their maximum generation but has also induced large sum of new investment in the country.

In the year 2015, historically large number of 12113 MW of
private sector investment was facilitated which single year achievement was much higher than the combined facilitation of the past 20 years 1994 to 2014, which accumulatively had been less than 10,000 MW.