Daily Times

Pakistan Business Forum (PBF) on Tuesday said that attempts to stem the growth of the energy circular debt through tariff increases was not a sustainable way.

Chairman PBF Punjab Muhammad Naseer Malik said fifty six percent of direct taxes are paid by industry, which is more than twice its share in the GDP. Denying industry competitive energy tariffs undermines its positive contribution to the economy.

“Tariff increases may provide short-term relief to the fiscal deficit but undermine the health of the economy,” he added

Muhammad Naseer Malik further stated that since 2013, we have been adding capacity by persuading companies that they will get payments against capacity addition regardless of whether the electricity is sold or not. This condition may have been the ground realty of that time when the country needed more capacity and this was the only way of gaining investors’ confidence but now the policy should be revisited. Capacity payment is fixed while the energy price varies. Imported fuel is another reason for the circular debt. Besides, all payments including the capacity payments are linked to the US dollar. As a result, when the rupee loses value, the burden of circular debt rises.

Besides, transmission losses and bill recovery failure are contributing to the liability as the GDP rate decreases with the increase in cost of electricity. He pointed out some key areas that should be taken up for action as a national priority. These include up-gradation of energy efficiency and conservation standards, replacement of inefficient appliances and consumer awareness for responsible use of energy.

The chairman PBF Punjab estimated that dollar outflow of around $1.25 billion could be potentially saved annually through the implementation of efficiency and conservation measures. He emphasized that theft and line losses should be addressed through advanced metering and cabling, citing that line losses ran as high as 9% over and above the percentage allowed by the National Electric Power Regulatory Authority.

PBF official further suggested government may prioritise substituting expensive imported fossil fuels with local indigenous and renewable energy resources (Hydel, Thar Coal, Solar, Wind etc) and establish healthy discussions with IPPs to meet halfway on the capacity costs.

In addition, the government must fix chronic governance issues in distribution companies and ensure proper recovery of billing payments, like engaging in a public-private partnership to lower commercial losses.

He lamented that the PTI government did not pay heed to rehabilitation and maintenance of old power plants which caused several system constraints, inflicting heavy losses.