The Economic Coordination Committee (ECC) has urged a gradual shift towards a uniform tariff system in the power sector as part of ongoing efforts to address the country’s circular debt crisis, which continues to impact foreign-funded energy projects, The Express Tribune reported.
During a recent meeting, the Power Division outlined the challenges posed by circular debt, which reached Rs1,614 billion at the end of fiscal year 2025. Despite several reforms, the debt continues to accumulate due to factors such as poor bill recoveries, line losses above regulatory targets, and unpaid government subsidies.
The ECC discussed the Circular Debt Management Plan (CDMP) 2025-26, which includes measures aimed at improving efficiency, reducing debt accumulation, and addressing the broader issues impacting power producers.
The committee emphasised the importance of continued consultation between the Petroleum, Power, and Finance Divisions to create a roadmap for reducing the circular debt.
While the targets set by the International Monetary Fund (IMF) were met, the committee noted that future efforts should focus on improving efficiency. The Finance Division also supported the shift to a uniform tariff system as a tool to enhance market efficiency and ensure better financial management across the power sector.
The committee also discussed the ongoing privatisation process of state-owned power generation companies (Gencos) and independent power producers (IPPs). The Power Division informed the committee that the schedule for the privatisation of 4 to 6 Gencos is being developed, which will help address liabilities.
The CDMP aims to reduce debt flow by phasing out the accumulation of power producers’ liabilities and implementing efficiency measures. Additionally, the plan includes provisions for cost-reflective tariffs, resource availability, and addressing the volatility of exchange rates and fuel prices. The goal is to reduce the circular debt flow to a sustainable level through better risk management, improved operational efficiency, and fiscal support.
The Finance Division also committed to ensuring that subsidies are properly budgeted and released on time to support the implementation of the CDMP.
