Pakistan attributes $8.9 bln circular debt, inflated bills to ‘poor governance’ in distribution firms

A youth walks on a wall while searching for drinking water in Rawalpindi on July 8, 2020. (AFP/File)
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Updated 03 February 2024
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Pakistan attributes $8.9 bln circular debt, inflated bills to ‘poor governance’ in distribution firms

  • NEPRA says governance issues significantly contributed to circular debt, with no signs of reduction
  • The power regulator calls for structural overhaul of distribution companies, end of cross-subsidies

KARACHI: Pakistan’s National Electric Power Regulatory Authority (NEPRA) has blamed the surging circular debt, which has ballooned to approximately Rs2.3 trillion ($8.9 billion), and inflated electricity bills on “poor governance” within power distribution companies (DISCOs).

Pakistan’s power sector has been grappling with several challenges, including the growing circular debt, increasing cost of electricity, inefficiencies in the generation, transmission, distribution and supply segments, fuel supply issues, under-utilization of efficient plants, and governance and compliance.

Governance issues have significantly contributed to the mounting circular debt, which has now reached a staggering Rs2.3 trillion, as of June 2023, showing no signs of reduction, according to a NEPRA annual report released on Friday. The primary issues facing 10 DISCOs in the country include low bill recovery and high losses due to theft.

The power sector faced these persistent challenges as DISCOs stood at a critical juncture and struggled with the pervasive issue of old infrastructure, coupled with “poor governance,” the regulator said in its 2022-23 report.

“The mounting receivables of the DISCOs have been a major concern highlighted by the Authority over the past several years, receivables for DISCOs surged to approximately Rs 1,727,104 million ($6 billion), compared to Rs1,530,500 million ($5.3 billion) in FY 2021- 22, indicating an increase of Rs196,605 million,” the NEPRA report read.

“It is believed that DISCOs’ performance can significantly improve with the involvement of private sector. Therefore, concerted efforts are required in this direction.”

In Pakistan, the government administers the effective uniform tariff that companies charge their consumers and compensates the DISCOs for the difference, commonly known as Tariff Differential Subsidy (TDS).

Companies with lower regulated tariffs than the notified ones are not permitted to pass on the benefits of the lower tariff to their consumers. Instead, they levy a Tariff Rationalizing Surcharge (TRS) on their consumers to align it. Consequently, consumers of relatively efficient DISCOs subsidize those of less efficient DISCOs.

“The practice of cross-subsidization, where consumers of efficient DISCOs bear the financial burden of underperforming counterparts, inadvertently undermines efficiency and unintentionally fosters inefficiencies,” NEPRA said, recommending “urgent rectification” of the practice which it said must be discouraged.

The lack of oversight and accountability mechanisms within DISCOs led to mismanagement and corruption, further eroding the sector’s efficiency, viability and credibility.

“The performance-based robust human resource system is required to be developed and deployed in DISCOs to improve their performance,” the report read.

The authority stressed that “poor governance in DISCOs” needed to be curbed imperatively for sustained growth and financial viability of Pakistan’s power sector.

“Effective implementation of regulatory frameworks and robust oversight is crucial to improve governance in DISCOs,” it said. “Investment in human resource development and encouraging a culture of accountability can be instrumental to bring a positive shift in the performance of these companies.”

By tackling the governance issues, NEPRA said, Pakistan could pave the way for an efficient, transparent, and consumer-centric electric power sector, ultimately benefiting both the industry and the citizens alike.

High cost of electricity in Pakistan has emerged as a critical challenge affecting all segments of the society, ranging from domestic consumers to industrial and agricultural sectors.

Amid historically high inflation in the country, the extra ordinary increase in the price of electricity had badly disrupted life of an ordinary man, NEPRA acknowledged.

This price escalation emanated primarily due to increase in the prices of essential primary energy resources such as coal, oil and gas in the international market and drastic devaluation of Pakistani currency, which intensified financial strain on the power sector and consumers.

During the fiscal year 2022-23, thermal generation, including imported fuels, accounted for around 62 percent of the total generation capacity. Generation cost, around 83 percent, was the predominant factor, affecting per unit electricity price. Even a minor change in generation cost impacted the overall consumer-end tariff, according to the report.

A significant contributor to high electricity costs was the operation of old, less efficient plants in both public and private sectors. Many public sector plants, built in the early 1980s, exhibit efficiency as low as around 30 percent or lesser, and have become economically unviable and therefore need to be retired immediately.


Saudi ambassador honors Pakistani policewoman for heroic rescue, offers royal invitation to kingdom

Updated 01 March 2024
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Saudi ambassador honors Pakistani policewoman for heroic rescue, offers royal invitation to kingdom

  • ASP Shehrbano Naqvi safely extracted a woman from an enraged blasphemy mob in Lahore last month
  • She received widespread acclaim from the general public and was also praised by Pakistan’s army chief

ISLAMABAD: The Saudi ambassador to Pakistan, Nawaf bin Saeed Al-Malki, praised a female Pakistani police officer for her timely intervention that saved a woman surrounded by an enraged blasphemy mob in the eastern city of Lahore, extending a royal invitation to her for a visit to the kingdom.
Assistant Superintendent of Police (ASP) Shehrbano Naqvi received widespread acclaim from politicians, officials and the general public after a social media video showed her rescuing a woman wearing a dress with Arabic inscriptions, which some people mistook for verses from the Holy Qur’an.
Naqvi, who safely extracted the woman from the crowd, later clarified that the dress bore no sacred inscriptions, featuring only the Arabic word “halwa.”
According to the Associated Press of Pakistan (APP) news agency, during a meeting at the embassy, the Saudi envoy commended Naqvi’s selfless devotion that defused the volatile situation.
He also extended an invitation to her to visit the kingdom.
“The Saudi Ambassador to Pakistan praised the bravery of the police officer and assured her that the Saudi government would cover the expenses of her and her family’s trip to Saudi Arabia as honored guests,” reported the APP.
Independent Urdu, quoting an embassy spokesperson, revealed that Naqvi, along with her family, would be visiting Riyadh as royal guests before performing Hajj.
Prior to her meeting with the Saudi diplomat, Pakistan’s army chief General Asim Munir also invited Naqvi to his office to commend her dedication.
In the past, blasphemy charges have triggered mob lynchings in the country, with politicians assassinated, lawyers murdered and students killed over unverified accusations.


Pakistan’s former interior minister, Mir Sarfraz Bugti, elected unopposed as Balochistan’s chief minister

Updated 01 March 2024
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Pakistan’s former interior minister, Mir Sarfraz Bugti, elected unopposed as Balochistan’s chief minister

  • Bugti took oath as a caretaker federal minister last August before resigning in December to contest the recent elections
  • He asks Baloch insurgents to cease fighting and engage in dialogue, warning that the state would not condone violence

QUETTA: Pakistan’s former caretaker interior minister Mir Sarfraz Bugti was elected as the 25th chief minister of the southwestern Balochistan province on Friday, after no other lawmaker submitted nomination papers to contest the post.
Bugti previously served as the home and tribal affairs minister of the province and remained a senator from 2015 to 2021. Last year in August, he took the oath as the country’s interim minister for interior before resigning in December to contest the recent elections.
He participated in the provincial polls after joining Asif Ali Zardari and Bilawal Bhutto’s Pakistan Peoples Party (PPP).
“I am thankful to President @AAliZardari, Chairman @BBhuttoZardari, my party @PPP_Org, and the people of #DeraBugti who allowed me to serve the people of #Balochistan,” he said in a social media post. “May Allah guide me and help me to do justice with this heavy responsibility.”
Balochistan, Pakistan’s largest province by area, holds a strategic position of immense importance due to its rich mineral resources, including natural gas, coal and minerals, along with its access to the Arabian Sea through the deep-sea port of Gwadar.
The port is also a cornerstone of the multibillion-dollar China-Pakistan Economic Corridor (CPEC), part of Beijing’s Belt and Road Initiative, making the province a pivotal player in regional connectivity and trade routes between Asia, the Middle East and beyond.
Balochistan has also experienced a low-level insurgency for decades by Baloch separatist groups who express grievances over political disenfranchisement, economic marginalization and the exploitation of the province’s rich natural resources without adequate benefit to the local population.
However, Pakistani authorities have always denied these claims.
Bugti, scheduled to take the oath at the Governor House tomorrow, asked Baloch insurgents to cease fighting the state and engage in dialogue while speaking to the media.
“The Pakistan Peoples Party believes in dialogue to resolve all political issues,” the newly elected chief minister said. “We wish all militants to skip violence and become part of the mainstream political paradigm. However, the state will not condone any kind of violence.”


Pakistan condemns Israel’s ‘policy of mass starvation’ after killing of over 100 Palestinians in Gaza

Updated 01 March 2024
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Pakistan condemns Israel’s ‘policy of mass starvation’ after killing of over 100 Palestinians in Gaza

  • Eyewitnesses say Israeli troops opened fire on a group of Palestinians waiting for life-saving aid and food delivery
  • Pakistan’s foreign office says Israel must face justice for committing crimes against Palestinians with impunity

ISLAMABAD: Pakistan on Friday condemned the killing of over 100 Palestinians who were trying to get food from an aid convoy in Gaza City a day earlier, saying the incident had highlighted Israel’s “deliberate and inhumane policy of mass starvation.”
According to eyewitnesses, Israeli troops opened fire on a crowd of Palestinians waiting for aid and food amid the rubble of their city destroyed by relentless airstrikes ordered by the Netanyahu administration last year in October.
Israel besieged the Gaza Strip after a surprise attack was initiated by Hamas in response to the deteriorating condition of Palestinian people living under Israeli occupation. The ensuing war has led to the killing of over 30,000 Palestinians, most of them women and children, as much of the world has accused the Israeli authorities of carrying out a genocide in Gaza.
International aid groups have also complained of increasing difficulties while delivering food supplies to starving Palestinians due to the Israeli military.
“Pakistan strongly condemns yesterday’s massacre by Israel’s occupation forces of unarmed Palestinians, who were awaiting life-saving aid and food delivery in Gaza,” foreign office spokesperson Mumtaz Zahra Baloch said during her weekly media briefing. “This massacre demonstrates a blatant disregard for civility and international humanitarian law and Israel’s deliberate and inhumane policy of mass starvation.”
Baloch reiterated her country’s stance for an immediate and urgent ceasefire while calling for unimpeded access of humanitarian aid to the people of Gaza.
“Israel must also face justice for its crimes against humanity being perpetrated with impunity against the Palestinian people,” she added.
The incident in Gaza has come at a time when various stakeholders in and around the region are trying to negotiate a ceasefire to end the conflict which has lasted for nearly five months.


Brothers accused of sparking blasphemy riot against Christians in Pakistan last year released

Updated 01 March 2024
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Brothers accused of sparking blasphemy riot against Christians in Pakistan last year released

  • The brothers were detained on suspicion of defacing the Holy Qur’an in Jaranwala where a mob vandalized Churches
  • Christians make up around two percent of Pakistan’s population and occupy one of the lowest rungs in society

LAHORE: Two brothers accused of blasphemous acts that sparked a mob in Pakistan to ransack homes and churches in a Christian enclave last year have been freed from jail, their lawyer said Friday.
More than 80 Christian homes and 19 churches were vandalized by crowds in the eastern city of Jaranwala last August, after accusations spread that a Holy Qur’an had been desecrated.
Blasphemy is an incendiary charge in deeply conservative, Muslim-majority Pakistan, where even unproven allegations of insulting Islam have provoked deadly vigilantism.
While police rounded up more than 125 suspected rioters, they also detained two Christian brothers on suspicion of having defaced a Holy Qur’an – a violation of Pakistan’s harsh blasphemy laws which can carry the death penalty.
But the brothers’ lawyer Tahir Bashir told AFP they had been freed after an anti-terror court declined to bring their case to trial on Thursday.
“Without a trial, no suspect can be detained indefinitely in jail,” Bashir said, declining to publicly name his clients out of fear for their safety.
“They are free, they are with their family. They were very happy to be released,” he added.
Hundreds of Christians fled Jaranwala’s Christian quarter last summer when rioters surged in, setting churches ablaze and raiding homes.
At its peak the crowd numbered around 5,000 and was spurred by mosque loudspeakers announcing a Holy Qur’an had been torn, scrawled with offensive words and stuck to the walls of a local mosque.
Christians, who make up around two percent of Pakistan’s population, occupy one of the lowest rungs in society and are frequently targeted with spurious blasphemy allegations.
Politicians have also been assassinated, lawyers murdered and students lynched over such accusations.
Last week, police were forced to intervene in the eastern city of Lahore when a woman wearing a shirt adorned with Arabic calligraphy was surrounded by a mob accusing her of blasphemy.
The crowd of men said the clothing depicted the Holy Qur’an but it was in fact emblazoned with the Arabic word for “beautiful.”
The woman issued an apology for causing offense, but none of the men were arrested.
Pakistan’s top Supreme Court judge has also been targeted by veiled death threats recently after ordering the release of a man accused of disseminating a blasphemous text.


Inflation in Pakistan hits 23.1%, reaching its lowest point since June 2022

Updated 01 March 2024
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Inflation in Pakistan hits 23.1%, reaching its lowest point since June 2022

  • Pakistan faces historically high inflation, though the situation has improved from 38 percent recorded last year in May
  • Given the February inflation rate, experts predict the central bank to begin monetary policy easing from this month

KARACHI: Pakistan’s inflation rate was recorded at 23.1 percent in February, marking its lowest level since June 2022, on an annual basis despite surging food and energy costs, according to official data released on Friday.
Pakistan continues to face historically high inflation, though the situation has improved from the all-time high level of 38 percent recorded last year in May.
Last month, the prices of tomatoes and cigarettes saw substantial increases of 114.6 percent and 71.2 percent, respectively, on an annual basis. Condiments and spices rose by 55.3 percent, sugar by 53.4 percent, fresh vegetables by 46.2 percent and wheat flour by 45 percent.
In the non-food category, gas charges skyrocketed by 318.7 percent, electricity charges by 74.9 percent, transport services by 35.1 percent, textbooks by 34.7 percent, newspapers by 34.2 percent and accommodation services by 29.5 percent.
February’s inflation, the lowest in 20 months, suggests a potential easing in the country’s monetary policy stance.
“The low inflation rate was expected and interestingly despite incorporating recent gas and petroleum price increase in February the number is low. We will see this trend continue in the future and inflation trajectory will be downward,” Tahir Abbas, head of research at Arif Habib Limited, told Arab News.
Given the February inflation rate, experts predict the central bank will begin monetary policy easing from March onwards, with the market anticipating an indicative interest rate cut of around 1 percent this month.
Since June last year, the State Bank of Pakistan has maintained the interest rate at an all-time high of 22 percent.
The central bank recently adjusted its average inflation forecast for the current fiscal year to 23-25 percent, up from 20-22 percent, due to hikes in energy prices.