Govt Slashes Power Sector Circular Debt by Rs. 780 Billion, Offers Relief to Consumers
ISLAMABAD – In a significant development, 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 recent NEPRA hearing on fourth-quarter tariff adjustments for FY2024–25.
Key Factors Behind the Debt Reduction
Officials credited this major reduction to:
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Lower line losses
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Higher bill recoveries
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Savings from renegotiated Independent Power Producer (IPP) contracts
Improved performance by distribution companies (DISCOs) alone contributed Rs. 200 billion in savings, while other targeted interventions addressed the remaining shortfall.
To further manage circular debt, the government is securing Rs. 1.275 trillion in new bank loans—without imposing any new surcharges on electricity consumers.
Refunds Likely for Power Consumers
During the hearing, NEPRA was informed that electricity users may receive a refund of Rs. 1.8 per unit, totaling Rs. 53.393 billion, including for K-Electric customers.
This refund follows a Rs. 53.7 billion drop in capacity payments and Rs. 662 million in transmission gains, though partially offset by maintenance costs of Rs. 182 million and system fees of Rs. 804 million.
Industrial Consumption & Controversy
A surprising 49% increase in industrial electricity usage was also reported, despite claims of widespread factory shutdowns. Officials explained the increase stemmed from a shift by industries from captive power generation to DISCO-supplied electricity, even as key facilities like Neelum-Jhelum remained offline.
Expert Concerns: A Short-Term Fix?
While the government’s efforts signal progress, industry leaders caution that the relief may be short-lived, noting that much of the circular debt clearance relies on fresh borrowing.
