February 24, 2020: Spokesperson of Power Division in a statement said that Circular Debt stood at 961 at end of December 2019 with PHPL loans at 804 billion.
The growth in six months have been 103 billion and at no point in time, the growth on a monthly basis has been 104 billion. The CD build-up estimated for the current financial year of 134 billion which will increase the stock of CD to Rs 946 billion other than PHPL of 804 billion.
The build contributing factors vary during a particular month and the effect of seasonality is prominent in the buildup.
The significance of the number 1.9 trillion “mark” in certain media’s news items is not as clear as what this number will signify? The CD plan developed is on an annual basis and the matter feeding into the flow are time-bound actions which show their result in a time-bound manner.
The numbers quoted in the news item on how much efficiency improvement and loss reduction will feed into a reduction of circular debt and based on sketchy information gathered and presented without doing any proper analysis.
At no time the gap of 478 billion been projected by power division. The flow number is 134 billion on an annual basis.
The distribution margin is never attributable towards the buildup of CD or flow of the CD. The regulator determines the DM of a DISCO. This number is for the O&M costs of DISCOS and if it’s not paid the companies don’t undertake development works or can’t pay their salaries.
How does it translate into the buildup of CD can only be answered by the author? The CD plan intends to bring down the buildup circular debt in phases and it does not jump down to 75 billion in the first year.
The actions required to reduce the buildup include a major part under efficiency improvement on which action in each DISCO in form of theft control, loss reduction and recovery improvement is underway.
