The circular debt in the power sector has been a cause for concern, with the figures for the first 11 months of FY24 revealing a significant increase. During this period, the circular debt reached Rs2.655 trillion, marking a growth of Rs9 billion compared to the same period in FY23. In the previous fiscal year, the circular debt stood at Rs2.310 trillion.
To adhere to IMF agreements, the government is required to reduce the circular debt to Rs2.310 trillion by June 30, 2024. However, the Power Division has yet to release the circular debt data for the entire FY24 period, which ends on June 30, on its official website.
The substantial increase in circular debt in July-May 2023-24 is attributed to various factors. This includes outstanding payments of Rs1.780 trillion to power producers, Gencos’ payables of Rs110 billion to fuel suppliers, and loans amounting to Rs765 billion held in the power holding company (PHP). By April 2024, the circular debt had risen to Rs2.729 trillion before slightly decreasing to Rs2.655 trillion in May 2024.
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Despite efforts to combat electricity theft, the losses incurred by Distribution Companies (Discos) have surged to Rs230 billion. Additionally, the system faced recovery losses of Rs279 billion during the first 11 months of FY24, with prior adjustments amounting to Rs155 billion.
It’s worth noting that after a delay of seven months, the Power Division finally uploaded the circular debt reports for February, March, April, and May 2024 in one go on August 30. However, the circular debt report for June is expected to be uploaded following approval from Federal Minister Awais Leghari.
Officials from the Power Division have expressed their commitment to reducing the circular debt for the whole of FY24 to Rs2.3 trillion. This will involve settling outstanding dues to Independent Power Producers (IPPs) in accordance with the IMF’s conditions.
