ISLAMABAD: The power sector circular debt increased by Rs79 billion in the first quarter (July-September) of the current fiscal year to Rs1.693 trillion, which was scaled down by Rs780 billion last year through capital injections and around Rs1.225 trillion commercial borrowing.

According to a quarterly report released by the Power Division, the new fiscal year began with Rs1.614tr, compared with Rs2.467tr in the same period last year. It said payables to power producers increased to Rs944bn at the close of September, up from Rs861bn at the start of the fiscal year on July 1. The payables to power producers had amounted to Rs1.688tr as of end-September last year.

The report said past debt parked in the Power Holding Company of the Power Division remained unchanged at Rs660bn during the first quarter of the fiscal year. It stood at Rs683bn by the end of the first quarter last year.

The power division reported that circular debt increased by more than Rs170bn due to inefficiencies and inadequate bill recovery by the Distribution Companies (Discos). However, this was significantly lower than the Rs239bn under the same account and period of the last fiscal year.

Power Division blames Rs79bn rise on inefficiencies, seasonal factors

The report showed that circular debt had increased by Rs73bn in the first quarter of last year, compared to Rs79bn this year. This was despite the fact that the finance ministry had disbursed Rs19bn in budgeted subsidies, compared to Rs28bn in unreleased subsidies during the same period last year. This was on top of Rs178bn in additional recoveries from consumers due to prior-year adjustments.

Excluding the above Rs198bn in additional funds from subsidies and prior-year adjustments, the circular debt would have increased by Rs276bn on account of Rs67bn in interest charges, Rs5bn in pending generation costs, Rs87bn due to distribution companies’ inefficiencies, and Rs84bn in under-recoveries.

The report claimed Rs229bn in receivables from K-Electric as of end-September 2025, including a principal amount of Rs42bn and about Rs187bn in markup.

The power division in a statement, however, tried to dispel the impression caused by its own report that an increase in circular debt by Rs79bn in the first quarter of the new fiscal year was a renewed upward trend, contrary to the government’s commitment to contain circular debt accumulation.

A Power Division spokesperson said the increase of Rs79bn in the first quarter “should be viewed in full context”. It said during the same quarter last year, circular debt had increased by Rs73bn, but by the end of that fiscal year, the overall stock of circular debt was reduced by Rs780bn. “The current quarterly rise is therefore attributable to seasonal and operational factors that typically influence monthly flows and are expected to reverse over the course of the year,” he said.

Importantly, Disco’s inefficiencies (losses and low recoveries) during July-September were reduced by Rs67bn to Rs171bn, compared to Rs239bn in the same period last year, underscoring the government’s firm commitment to improving operational performance and maintaining financial discipline in the power sector.

Published in Dawn, November 6th, 2025