CIRCULAR DEBT IN ENERGY SECTOR OF PAKISTAN

CI CULAR
A owes 100 to , ´ owes 100 to C ´ C owes 100 to A
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CIRCULAR DEBT IN PAKISTAN

EFFECT F CIRCULAR AKI TAN
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EBT I

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Causes cash-flow shortfall in energy firms Increases borrowing from banks by energy companies to meet expenditures ower shortage in the country Reduced industrial activity due to power shortage ocial effects due to extended load sheding for residential electricity consumers

ENERGY SUPPLY CHAIN OF PAKISTAN
Currency Exchange from Rs. To $

Revenue Collection in Rs.

Furnace Oil Supply

Cash Flow

Electricity Supply

Furnace Oil Supply

CAUSES F CIRCULAR EBT IN AKISTAN to pay power tariff subsidies to ´ Govt. unable
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electricity distribution companies like EPCO, KESC etc. Electricity distribution companies fail to collect bills from consumers istribution companies default on payments to power producers like HUBCO, KAPCO etc. Power producers are not able to make payments for fuel oil purchases from oil companies like PSO Oil companies delay settling the payables to refineries

RECENT SITUATION OF CIRCULAR DEBT
Payable PEPCO (Wapda) KAPCO HUBCO PIA PSO PSO PSO PSO Govt. for Subsidy* Govt. for Subsidy* Receivable PSO PSO PSO PSO PARCO PRL NRL ARL PEPCO KESC 34 17.32 33.95 1.32 25 12 8 15 43 15

Amount (Billion Rupees)

All figures are of February 2010 and taken from a report published in Internet edition of Daily Times Newspaper on 31st March. * Subsidy for reduced electricity tariff

HOW TO AVOI PAKISTAN
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CIRCULAR

EBT IN

Independence from Furnace Oil based electricity generation ´ Linking of electricity prices with change in oil price (fuel adjustment) ´ No Govt. subsidy on electricity and Oil ´ Privatization of companies

CLEARING CIRCULAR PAKISTAN
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EBT IN

Govt. to float Rs 100 billion Bond in May 2010 to clear the mounted circular debts ´ One-year maturity period ´ Yield equal or slightly above 12.7 percent ´ Funds generated from these bonds will be used by govt. to pay-off it¶s liabilities which created the circular debt

THANK YOU!

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