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Despite sharp tariff rise, circular debt soars to Rs2.31tr

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The power sector circular debt jumped to Rs2.31 trillion by the end of June 2023 after revenue gains from a massive increase in electricity prices were lost to the inefficiencies, theft and losses faced by power distribution companies.
Official statistics showed that during the fiscal year 2022-23, which ended in June, the Pakistan Democratic Movement (PDM) government failed to improve the “acute” power sector situation. The circular debt had a gross increase of Rs789 billion, with an average rise of nearly Rs66 billion monthly.
After excluding the impact of the increase in electricity prices and budget subsidies, there was a net rise of Rs57 billion in the circular debt during the last fiscal year, reversing the decrease a year earlier.
The stock of circular debt at the beginning of FY23 was Rs2.253 trillion, which jumped to Rs2.31 trillion, according to energy ministry officials.
As part of the conditions set by the International Monetary Fund (IMF) and World Bank, the PDM government increased electricity prices twice in the past year. It first raised the tariff by Rs7.91 per unit in July last year and then jacked it by Rs8 per unit from July this year.
In addition, the government slapped a debt servicing surcharge of Rs3.23 per unit and withdrew subsidies for the agriculture and industrial sectors.
These increases pushed up per-unit prices to over Rs50, but the bureaucracy and the last political leadership failed miserably in correcting the wrongdoings of power distribution companies. Some people with a monthly income of less than Rs20,000 have monthly bills of Rs16,000 for July.

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