Circular debt surges to Rs2.31 tr

ISLAMABAD: The power sector circular debt jumped to Rs2.31 trillion by the end of June 2023 after revenue gains from a massive increase in electricity prices were lost to the inefficiencies, theft and losses faced by power distribution companies.

Official statistics showed that during fiscal year 2022-23, which ended in June, the Pakistan Democratic Movement (PDM) government failed to bring about any improvement in the “acute” power sector situation. There was a gross increase of Rs789 billion in the circular debt with average rise of nearly Rs66 billion per month.

After excluding the impact of increase in electricity prices and budget subsidies, there was a net rise of Rs57 billion in the circular debt during the last fiscal year, reversing the decrease a year earlier.

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The stock of circular debt at the beginning of FY23 was Rs2.253 trillion, which jumped to Rs2.31 trillion, according to officials of the energy ministry quoted by The Express Tribune.

As part of conditions set by the International Monetary Fund (IMF) and World Bank, the PDM government increased electricity prices twice in the past one year. It first raised the tariff by Rs7.91 per unit in July last year and then jacked up the tariff by Rs8 per unit from July this year.

In addition to this, the government slapped a debt servicing surcharge of Rs3.23 per unit and withdrew subsidies for the agriculture and industrial sectors.

These increases pushed up per-unit prices to over Rs50 but the bureaucracy and the last political leadership failed miserably in correcting the wrongdoings of power distribution companies.