Islamabad September 1 2024: Pakistan lost PKR 509 billion due to DISCOs’ inefficiencies and under-recoveries during the period from July 2023 to May 2024, which is 32.2 percent higher than the PKR 385 billion lost in the same period last year, according to data released by Ministry of Power.
In FY24, from July to May, the circular debt increase was slightly lower at PKR 345 billion compared to the previous year’s same period. Although the increase due to budgeted but unreleased subsidies was much lower (just PKR 10 billion compared to PKR 85 billion in the previous year), the inefficiencies in DISCO operations and under-recoveries continued to be significant contributors to the debt build-up.
At the May 2024, Pakistan’s circular debt reached a staggering PKR 2,655 billion, with a significant portion owed to power producers (PKR 1,780 billion) and an additional PKR 765 billion parked in the Power Holding Limited (PHL). This debt, a perennial issue for the country’s energy sector, continued to grow, with the total increasing by PKR 345 billion during the period from July to May 2024.
Circular Debt Details as of May 2024 (PKR Billion):
| Description | FY23 | Jul-May 23 | Jul-May 24 |
|---|---|---|---|
| Payable to Power Producers | 1,434 | 1,771 | 1,780 |
| GENCOs’ payable to fuel suppliers | 111 | 110 | 110 |
| Amount Parked in PHL | 765 | 765 | 765 |
| Total | 2,310 | 2,646 | 2,655 |
| Increase / (Decrease) in Circular Debt | 57 | 394 | 345 |
Break-up of Increase / (Decrease) in Circular Debt:
| Breakdown Description | FY23 | Jul-May 23 | Jul-May 24 |
|---|---|---|---|
| 1. Budgeted but unreleased subsidies | – | 85 | 10 |
| 2. Unclaimed subsidies | (70) | (46) | – |
| 3. Interest Charges (PHL+IPPs) | 143 | 145 | 138 |
| 4. Pending Generation Cost (QTAs+FCA) | 250 | 171 | 176 |
| 5. Non Payment by K-Electric | (53) | 57 | (48) |
| 6. DISCO Losses Inefficiency | 160 | 136 | 230 |
| 7. DISCO Under recoveries | 236 | 249 | 279 |
| 8. Other Adjustments (Prior Year Recovery, etc.) | (447) | (276) | 155 |
| Sub-total (a) | 220 | 522 | 629 |
Payment through Fiscal Space:
| Description | FY23 | Jul-May 23 | Jul-May 24 |
|---|---|---|---|
| 9. PHL Principal Repayments | (35) | (35) | – |
| 10. PHL unpaid markup | – | – | – |
| 11. Stock Payments | (127) | (93) | (284) |
| Sub-total (b) | (162) | (128) | (284) |
The government’s efforts to control the growth of circular debt included paying off part of the PHL principal and managing stock payments, which helped in reducing the rate of increase. However, the underlying structural issues, such as DISCO inefficiencies and under-recoveries, remain challenges that need long-term solutions.
In conclusion, while there has been a slight improvement in managing the circular debt from FY23 to FY24, the persistent issues in the energy sector require continued focus and reform to prevent further escalation of this financial burden.
