The government has attributed part of the increase in Pakistan’s power-sector circular debt to financial shortfalls and non-payments by K-Electric (KE), as authorities review measures to contain the growing liabilities in the electricity sector.
The Power Division briefed the Cabinet Committee on Energy (CCoE) on the latest circular debt position and the factors contributing to the increase.
Circular Debt Stock Reaches Rs1.675 Trillion
The committee was informed that the circular debt stock stood at Rs1.675 trillion, compared with a target of Rs1.614 trillion, resulting in an unfavourable variance of Rs61 billion.
Gross circular debt flow was recorded at Rs364 billion against a target of Rs300 billion, highlighting continued pressure on the power sector’s financial position.
Meanwhile, gains from reducing inefficiencies in distribution companies (DISCOs) stood at Rs336 billion, below the target of Rs430 billion.
KE Non-Payments Reach Rs194 Billion
According to the Power Division, K-Electric’s non-payments remained a significant factor, reaching Rs194 billion.
The amount included Rs165 billion in invoices owed to the Central Power Purchasing Agency-Guarantee (CPPA-G), along with Rs29 billion in late-payment surcharges.
The figures were presented as part of the government’s assessment of the factors contributing to the increase in the circular debt stock.
Financial Support Reduction Adds to Debt Pressure
The Power Division also identified a Rs428 billion reduction in financial allocations and savings in fiscal support as one of the factors behind the increase in circular debt.
The development comes as the government continues to face challenges in managing power-sector finances, including distribution inefficiencies, payment obligations and the accumulation of liabilities across the electricity supply chain.
CCoE Directs Power Sector Efficiency Measures
The Cabinet Committee on Energy directed the Power Division to pursue organisational measures aimed at improving financial and operational efficiency across the power sector.
The committee also called for expenditure reductions with the objective of lowering electricity costs for consumers.
The directives reflect the government’s focus on addressing structural issues contributing to the accumulation of circular debt.
Power Sector Reforms to Be Expedited
The CCoE further directed the Power Division to expedite power-sector reforms to prevent future financial slippages and deficits.
The ministry assured the committee that necessary measures would be taken to address the circular debt issue and improve the financial sustainability of the power sector.
The latest figures underline the continuing challenge of controlling circular debt while improving the efficiency of distribution companies and ensuring timely settlement of power-sector payments.