Circular debt: back to square one

Recall that the government’s power sector reforms were aimed at energy security and affordability. Almost five years down the road, it could only claim to have achieved energy availability – without being secured or affordable. Little wonder that the beast that the circular debt is back on its feet. Scarier, mightier and bigger.

It never went away. It was just brushed under the carpet and never nipped. It was always going to be when and not if, when the circular debt gets ugly. That is because the illness was not treated for the root cause. The pain killer injection worth Rs480 billion kept it going for two years, and the root causes remained largely untouched. And here we are, back with an outstanding circular debt toll in excess of Rs500 billion and that excludes Rs400 billion already parked in the Power Holding Private Limited.

The Economic Coordination Committee (ECC) has reportedly finalized the plan to partially clear the dues to the tune of Rs80 billion to keep the ship afloat. The instruments include loans from commercial bank, treating the accumulated amount as equity in DISCOs, TFCs and more. This may offer a breather to keep the turbines running come peak summers.

Published in Business Recorder, 22nd March, 2018