Govt nixes circular debt return plan

The government has shot down a proposal to reduce electricity prices by about Rs4 per unit by retiring Rs1.8 trillion worth of circular debt through raising public debt – in a move that underscores limited options for providing any substantial relief to consumers. The only success that the government has so far achieved is the reduction of 60 paisa per unit by terminating the contracts of five independent power producers (IPPs) a few days ago. The Power Division had proposed that the IPPs should be paid Rs1.8 trillion worth of circular debt by issuing Pakistan Investment Bonds (PIBs) at a five-year, fixed interest rate or Islamic bonds. The new debt had been proposed to be placed in the books of federal government, which the finance ministry did not accept, sources said.