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Finance Ministry: Delayed payment of public dues adversely affects cash flow

Finance Ministry: Delayed payment of public dues adversely affects cash flow

ISLAMABAD: The Finance Ministry has admitted that persistent delays in the payment of public dues by public entities directly affects their cash flows.

“Untimely payment of public dues such as electricity, gas, taxes etc put financial strain on the government because the government has to pick up their liabilities to keep these entities functional,” a well-placed source at Finance Ministry told Customs Today on Tuesday.

The source said that the government was conscious of the possible negative impacts of delayed payments of public dues and took several steps to ensure timely payment of dues and arrears. “To settle power sector circular debt of Rs 480 billion, the government started at source adjustment of 25% payables of current bills from provincial governments through federal adjuster as per decision of the Council of Common Interests (CCI),” source said.

“The government cited the retirement of the circular debt as a priority, and within five weeks of taking office announced that it had taken measures to deal with the issue,” the source added, saying that debt was cleared by paying Rs 161 billion in cash to the IPPs, issuing Pakistan investment bonds to public sector entities responsible for oil and gas exploration and the marketing of petroleum products, and making “non-cash payments” to the Water and Power Development Authority (WAPDA) and the National Transmission and Distribution Company (NTDC).

The source observed that increased dependence on expensive, thermal oil power generation had given rise to the phenomenon of circular debt in the energy sector, in terms of which slippages in bill payments (particularly on the part of public institutions) triggered off a chain of delayed payments for imported furnace oil, natural gas or other inputs to the thermal generation system, which in turn hamper the operation of the power plants and result in less than optimum capacity usage

Similarly to curtail distribution losses of the DISCOs vigorous campaign against theft and default has been initiated,” the source said, adding that amendment in Electricity Act 1910 to provide required punishment for electricity theft was in the process of legislation with the Parliament.

“Sooner the new law is passed it will be instrumental in curbing the power sector theft and increasing the revenue of power sector distribution companies,” the source added, saying that timely payment of Tariff Differential Subsidy was being made by the government to distribution companies. The source said that the Federal Board of Revenue (FBR) was working vigorously to maximize recovery of tax dues from public sector entities and it had produced very good results so far.