Circular debt audit by NEPRA

The cabinet committee on energy CCOE) has assigned the task of conducting audit of circular debt to National Electric Power Regulatory Authority (NEPRA). Earlier the regulator has differed with the figures of circular debt compiled by Power Division and International Monetary Fund officials had remained engaged with this division, suggesting third party audit of power sector circular debt. A questionnaire in this regard was also provided to this division for this purpose. Federal Minster for Planning Asad Umer, who is chairman of CCOE, has expressed reservations over the authenticity of circular debt figures on the plea that distribution companies may have fed wrong data and assigned the task its audit to NEPRA. Swelling power sector circular debt has become a chronic disease of the national economy, sapping the scarce financial resources raised from taxes like ‘Cuscuta’ active parasite that reduce a green big tree to dry fire-wood. The factors that contribute to bulging circular debt are well known to the government but it is showing reluctance to address them once and for all. The inaction of previous two governments to address this issue was understandable because the top leadership of PPP and PML-N were part of part of the problem. Abandoning the electricity generation from hydel, wind and solar sources, exercising solely the option of expensive thermal power generation by fossil fuel such as diesel and furnace oil and above all shady power purchase agreements with local and foreign companies amply explains it. Unfortunately, IPPs representative still wield tremendous influence in government decisions that pertain to energy sector. It is the same lobby in the corridors of power which may be hindering renegotiation of power purchase agreements with IPPs, particularly the fallout of capacity trap clause, fixing a definite tenure of the agreements, and allowing the audit of electricity generation cost which has never been done in the past. Moreover capital expenditure and tariff agreed by the previous PML-N government with foreign companies for hydel power projects including Suki Kinari and Mahal and coal based thermal power projects will exacerbate the issue circular debt accumulation. Energy experts have persistently drawn the attention of the government in their writings in print media towards power sector reforms aimed achieving optimal energy mix thereby lowering the tariff to affordable limit. And the IMF demanded for third party audit. The multilateral donor agency meant by “third party” those speciaised institutions which are well versed with energy issues by dealing with them in other countries for which they had been accredited by the World Bank and the Asian Development Bank. The definition excludes NRPRA for the job of circular debt audit as it may not have the required accreditation by these donor agencies. It merits mention that Asian Development Bank had remained engaged with the special task of examination and evaluation of Rental Power projects in the last PPP government and on its report that government had to unwillingly shelve majority of rental power projects.