Electronic – causing – The target device is not ready for debugging

I am trying to debug code on PIC16F677 using MPLAB X IDE (v3.10) and Pickit 3 and result is this message – The target device is not ready for debugging. Please check your configuration bit settings and program the device before proceeding. The most common causes for this failure are oscillator and/or PGC/PGD settings.

Code looks like this.

#include <xc.h>
#include <stdbool.h>

#pragma config FOSC = INTRCIO
#pragma config WDTE = OFF       // Watchdog Timer Enable bit
#pragma config PWRTE = OFF      // Power-up Timer Enable bit
#pragma config MCLRE = OFF      // MCLR Pin Function Select bit
#pragma config CP = OFF         // Code Protection bit
#pragma config CPD = OFF        // Data Code Protection bit
#pragma config BOREN = ON       // Brown-out Reset Selection bits
#pragma config IESO = OFF       // Internal External Switchover bit
#pragma config FCMEN = ON       // Fail-Safe Clock Monitor Enabled bit

#define _XTAL_FREQ 8000000



void main(void)
{
    IRCF0 = 7;
    IRCF1 = 7;
    IRCF2 = 7;
    HTS = 1;
    SCS = 1;

    while (true)
    {

    }
}

I am not sure about those IRCF. Just tried out some things. I have tried without configuration bits in main function as well.

Do I need external oscillator for this? This poster http://ww1.microchip.com/downloads/en/DeviceDoc/50002010B.pdf says – Target device must be running
with an oscillator for the debugger
to function as a debugger. What does that even mean?