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 A owes 100 to B,

 B owes 100 to C
 C owes 100 to A
 Causes cash-flow shortfall in energy firms
 Increases borrowing from banks by energy companies
to meet expenditures
 Power shortage in the country
 Reduced industrial activity due to power shortage
 Social effects due to extended load sheding for
residential electricity consumers
Currency Exchange Crude
Oi l Impo
from Rs. To $ rt
Fu
Im rna
po ce
rt O
il

Revenue
Collection
in Rs. Furnace Oil
Supply
Cash Flow

Electricity
Supply
Furnace Oil
Supply
 Govt. unable to pay power tariff subsidies to electricity
distribution companies like PEPCO, KESC etc.
 Electricity distribution companies fail to collect bills
from consumers
 Distribution 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
Amount
Payable Receivable
(Billion Rupees)
PEPCO (Wapda) PSO 34
KAPCO PSO 17.32
HUBCO PSO 33.95
PIA PSO 1.32
PSO PARCO 25
PSO PRL 12
PSO NRL 8
PSO ARL 15
Govt. for Subsidy* PEPCO 43
Govt. for Subsidy* KESC 15
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
 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
 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

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