Minister for Power Omar Ayub Khan has said that the circular debt in the power sector is expected to level off soon and will hopefully start falling this year.
The minister said that a massive investment from China has helped reduce the power outage, but more time is required to control the damages caused by years of mismanagement.
He stated that the circular debt, which currently stands at Rs. 1.4 trillion ($10.1 billion), will begin to come down after the hike in electricity tariffs.
“All of a sudden, after January 1, you have a leveling off of the circular debt, because the new tariff has kicked in,” Khan said on Tuesday.
He said that the government plans to pay off the arrears from the previous years with extra revenue accumulated from the hike in tariff.
Within three to four years, the government expects to claw back Rs. 470-500 billion.
The power sector also expects a recovery of Rs. 43 billion annually in the circular debt parked in state-owned Power Holding Private Limited (PHPL), which holds about Rs. 600 billion of the Rs. 1.4-trillion debt. “That will take longer,” Khan said.
The government has launched a crackdown against power theft and is now modernizing distribution companies to minimize power losses, he stated.
The minister also mentioned using Rs. 200 billion, expected from Islamic bonds to service old expensive debt owed to independent producers to ease their financial crunch.
He added that the government was exploring new indigenous power resources to maximize production, which he expects to double to 55,000 megawatts by 2030 and is seeking investors as electricity demand is rising.
“There was a time when people were content with using one fan or bulb, but that’s not the case anymore,” he said, adding that now even the people in remote areas are using washing machines and other electronic items and they all require electricity.