Circular debt inches up to Rs2.4tr

ISLAMABAD: The power sector’s circular debt touched Rs2.396 trillion at the end of the first three quarters (July-March) of the current fiscal year, showing a modest Rs2 billion increase since July 1, but almost Rs398bn lower compared to March 2024.

A Power Division report on circular debt for the period ending March 2025 showed that payables to power producers increased by around Rs33bn to Rs1.633tr, up from Rs1.60tr on July 1, 2024.

On the other hand, the payables of public sector generation companies (Gencos) to fuel suppliers declined to Rs79bn by the end of March, down from Rs110b at the start of the fiscal year. The stock of circular debt parked in Power Holding Limited (PHL), a shell entity of the Power Division, remained unchanged at Rs683bn.

The federal government has also claimed over Rs223bn in receivables from K-Electric (KE) as of March 2025, which includes an overwhelming Rs186.5bn in markup on a principal liability of Rs36.5bn.

Payables to power producers rise to Rs1.63tr

The report showed that total circular debt at Rs2.396tn had increased by about Rs15bn from Rs2.381tr as of end-November 2024.

Of the three main components of circular debt, the report said, payables to power producers increased, payables to fuel suppliers decreased, and debt parked in PHL remained unchanged during the first nine months of FY25 compared to July 1, 2024.

However, compared to the period ending March 2024, all three components showed a significant decline. For example, payables to power producers dropped by almost Rs300bn (15.5pc) from Rs1.929tr to Rs1.633tr. Gencos’ payables to fuel suppliers fell by Rs20bn (20pc) to Rs79bn from Rs99bn.

Debt parked in PHL came down by Rs82bn (11pc), from Rs765bn to Rs683bn. Overall, total circular debt declined by 14pc or Rs398bn during the first nine months — from Rs2.794tr to Rs2.396tr.

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

This included an over-collection of Rs110bn on pending generation costs during the first nine months, compared to an increase of Rs145bn in the same period last year, and additional recoveries of Rs38bn under other prior year adjustments as of March 2025.

The report further noted that KE’s total non-payments amounted to Rs10bn by March 2025, compared to Rs59bn by end-November 2023. Including past dues, total claims against KE stood at Rs223bn, built upon a principal amount of Rs36.5bn.

Interestingly, KE has been claiming higher receivables from government entities, including provincial departments, and the two sides are engaged in negotiated settlements through arbitration.

On distribution companies (Discos), the report highlighted that inefficiency losses rose to Rs143bn by end-March 2025, up from about Rs102bn in March 2024 — contrary to public statements by the power minister about improvements in Discos’ performance.

However, it noted that inefficiency losses were still lower compared to Rs276bn at the close of the last fiscal year.

Meanwhile, Discos’ under-recoveries were recorded at Rs78 billion during the first nine months of the current year, compared to Rs262 billion in the same period last year.

The amount of budgeted but unpaid subsidies came to an end as the Finance Division overpaid by about Rs3bn during nine months. As a result, no interest charges were paid to banks this year, compared to Rs63bn paid last year.

Published in Dawn, April 29th, 2025