Islamabad 5 August: The federal government has reduced the power sector’s circular debt by Rs. 780 billion, bringing it down to Rs. 1.614 trillion, the Power Division revealed during a National Electric Power Regulatory Authority (NEPRA) hearing on fourth-quarter tariff adjustments (QTA) for FY2024–25 on August 5.
The reduction stems from lower line losses, improved bill recoveries, and savings from renegotiated contracts with Independent Power Producers (IPPs). Enhanced performance by Distribution Companies (DISCOs) contributed Rs. 200 billion to the savings, with additional measures accounting for the remainder.
To further tackle the debt, the government is raising Rs. 1.275 trillion in fresh bank loans, a move that has sparked concerns among industrialists who warn that this relief may be temporary, as it relies on borrowing rather than structural reforms.
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The Power Division assured NEPRA that no new surcharges will be imposed to repay these loans, addressing concerns raised by the business community. Notably, the Federal Board of Revenue (FBR) recently reversed a decision on arrest powers for tax non-compliance following pressure from businesses, signaling heightened sensitivity to industrial concerns.
NEPRA was informed that consumers may receive a refund of Rs. 1.8 per unit, totaling Rs. 53.393 billion, including K-Electric customers. This refund is driven by a Rs. 53.7 billion reduction in capacity payments and Rs. 662 million in transmission gains, partially offset by Rs. 182 million in maintenance costs and Rs. 804 million in system fees. The proposed refund aims to provide relief to consumers amid rising energy costs.
However, contradictions emerged during the hearing. Official data indicated a 49 percent surge in industrial power consumption, attributed to industries shifting from captive generation to DISCOs’ supply. Yet, industrialists reported widespread factory shutdowns, raising questions about the accuracy of consumption figures. The Power Division noted that some power plants, including the Neelum-Jhelum Hydropower Project, remained offline, which may have strained supply chains despite the reported consumption increase.
Analysts warn that while the debt reduction is a positive step, the reliance on new loans without addressing systemic issues—such as high transmission losses and inefficiencies in power generation—could perpetuate the cycle of circular debt. The government’s next steps, including the implementation of the loan plan and ongoing reforms, will be critical in ensuring sustainable progress in the power sector.
