The committee was informed that an additional Rs13 billion was linked to the fuel cost power surcharge.

ISLAMABAD:

The Power Division has attributed a significant increase in Pakistan’s power sector circular debt to reduced financial payments by K-Electric, according to a review by the Cabinet Committee on Energy (CCOE).

The Ministry of Energy (Power Division) said the CCOE had directed the division in its January 14, 2025 meeting to present quarterly figures on electricity billing, collections and circular debt for review.

The committee had also instructed the National Electric Power Regulatory Authority (Nepra) to ensure the accuracy and integrity of the data presented in the reports.

Circular Debt Stands at Rs1,798 Billion

The Power Division submitted verified circular debt figures for the third quarter of the 2025-26 financial year, covering January to March 2026, as well as the full financial year ending June 30.

According to the data, the circular debt stood at Rs1,798 billion by the end of June 2026, compared with the target of Rs1,802 billion. This represented a favourable variance of Rs4 billion against the target.

However, the gross flow of circular debt reached Rs420 billion, exceeding the target of Rs400 billion by Rs20 billion.

The inefficiencies of distribution companies, including transmission and distribution losses and under-recoveries, were recorded at Rs176 billion, compared with the target of Rs254 billion. This resulted in a favourable variance of Rs78 billion.

K-Electric Payments Affect Circular Debt

The Power Division told the energy committee that delayed payments by K-Electric were among the main factors restricting further reductions in circular debt.

It said K-Electric had outstanding payments of Rs171 billion, comprising Rs148 billion in CPPA-G invoices and Rs23 billion in late payment surcharges.

The committee was informed that an additional Rs13 billion was linked to the fuel cost power surcharge.

According to the Power Division, if the full outstanding payments had been received, the circular debt position would have improved by approximately Rs175 billion.

The Finance Division had earlier suggested that the dispute involving K-Electric should be addressed under the relevant Nepra law and regulations.

CCOE Calls for Power Sector Reforms

The CCOE reviewed the performance of power distribution companies against Nepra targets and compared their results with the previous year.

The committee directed the Power Division to pursue organisational measures to improve financial performance through greater operational efficiency and expenditure control, particularly across the power sector.

The CCOE also called for accelerated reforms to prevent future slippages and deficits in the electricity sector.

The Power Division assured the committee that necessary measures would be taken to address circular debt and improve the sector’s financial position.

Following the deliberations, the Ministry of Energy agreed to accelerate the implementation of power-sector reforms.