Power sector circular debt rises to Rs2.396 trillion

Pakistan’s power sector circular debt reached Rs2.396 trillion by the end of March 2025, marking a slight Rs2 billion increase since July 1, 2024. However, the total debt has decreased by Rs398 billion compared to the same period last year, showing a significant improvement in the sector’s financial health.

A report by the Power Division revealed that payables to power producers increased by Rs33 billion, rising to Rs1.633 trillion, compared to Rs1.60 trillion at the start of the fiscal year. 

In contrast, the payables of public sector generation companies (Gencos) to fuel suppliers decreased to Rs79 billion, down from Rs110 billion in July 2024. The circular debt parked in Power Holding Limited (PHL), a government entity, remained unchanged at Rs683 billion.

The federal government also reported receivables from K-Electric (KE) amounting to over Rs223 billion as of March 2025, including a substantial Rs186.5 billion in markup on a principal liability of Rs36.5 billion.

The total circular debt of Rs2.396 trillion at the end of March 2025 had risen by Rs15 billion from Rs2.381 trillion at the end of November 2024. However, compared to March 2024, all three main components of circular debt showed a decrease. 

Payables to power producers dropped by Rs296 billion (15.5%), from Rs1.929 trillion to Rs1.633 trillion. Gencos’ payables to fuel suppliers fell by Rs20 billion (20%) to Rs79 billion, while the debt parked in PHL decreased by Rs82 billion (11%) to Rs683 billion. Overall, total circular debt declined by 14% or Rs398 billion from Rs2.794 trillion to Rs2.396 trillion.

The reduction in circular debt was attributed to the over-collection of pending generation costs through quarterly tariff adjustments (QTAs) and fuel price adjustments (FPAs), as well as recoveries from prior year adjustments. 

This included an over-collection of Rs110 billion for pending generation costs during the first nine months, compared to Rs145 billion in the same period last year, along with an additional Rs38 billion recovered from prior year adjustments.

On the performance of distribution companies (Discos), the report noted that inefficiency losses had risen to Rs143 billion by the end of March 2025, up from Rs102 billion in March 2024. Despite claims by the power minister of improvements in Disco performance, inefficiency losses remained lower than Rs276 billion at the close of the previous fiscal year. 

Additionally, under-recoveries by Discos amounted to Rs78 billion in the first nine months of the current fiscal year, compared to Rs262 billion in the same period last year.

The Finance Division also overpaid subsidies by about Rs3 billion, eliminating the need for interest payments to banks this year, unlike the Rs63 billion paid last year.