Circular Debt in Pakistan’s Electricity Sector Hits Record High
Electricity distribution companies (DISCOs) are contributing an additional Rs. 600 billion annually to Pakistan’s already escalating circular debt, which now stands at an alarming Rs. 2.467 trillion.
Despite claims of a 92.44% recovery rate, inefficiencies and mismanagement continue to worsen the debt crisis. DISCOs artificially inflate their recovery rates by overbilling customers, recovering 10-15% more than the actual consumption. This practice distorts recovery figures while hiding the true scale of the problem.
Read More: Circular Debt Expected to Rise by Rs545b
The outstanding bills from both private and public sector consumers have surged by 69.64% since 2021, reaching a staggering Rs. 2.017 trillion. A significant portion of the debt is owed by high-profile defaulters, including political figures and industrial giants, who collectively owe Rs. 1.094 trillion. This amount has risen from Rs. 900.82 billion in FY2023.
Additionally, the few profit-making DISCOs, such as IESCO, GEPCO, LESCO, and MEPCO, are required to provide Rs. 125.78 billion in cross-subsidies to support loss-making companies. However, no concrete steps have been taken to address these imbalances or curb inefficiencies.
In FY24, the sector has suffered significant financial losses, with transmission and distribution losses exceeding regulatory allowances, costing the industry Rs. 276.35 billion. Furthermore, shortcomings in the recovery of billed amounts have added another Rs. 314.506 billion to the ever-growing circular debt.
