K-Electric owes govt over Rs225 billion, including Rs186.5 billion in interest

ISLAMABAD: The federal government of Pakistan has reported that it is owed over Rs225 billion by K-Electric (KE), which includes a significant Rs186.5 billion in interest on a principal amount of Rs38.8 billion.

According to the Power Division’s monthly report, the power sector’s circular debt stood at Rs2.381 trillion at the end of November 2024, showing a decrease of approximately 11 percent from Rs2.678 trillion in November 2023.

This monthly circular debt report was released for the first time in over six months and noted declines in all three components of the circular debt: payables to power producers, payables to fuel suppliers, and liabilities parked in Power Holding (Pvt) Ltd, during the first five months of the fiscal year (July-November), compared to the same period last year. However, inefficiencies within the system saw a massive increase of 35%.

The overall circular debt decreased from Rs2.6 trillion a year prior to Rs2.3 trillion in November 2024. The report highlighted that the power sector’s debt fell by Rs12 billion during the first five months of 2024, contrasting with a Rs368 billion rise during the same period in 2023.

The reduction was attributed to improved collection of pending generation costs through quarterly tariff and fuel price adjustments, as well as substantial prior year adjustment recoveries. Specifically, the first five months of the current fiscal year saw an over-collection on pending generation costs amounting to Rs31 billion, compared to a Rs146 billion increase in the previous year.

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Additionally, recoveries from previous years totalled around Rs234 billion by the end of November 2024, compared to Rs133 billion from past recoveries as of November 2023. The report also indicated that KE’s outstanding payments totalled Rs59 billion at the end of November 2023, whereas the current year’s outstanding payments were only Rs11 billion as of November 2024.

The total claims against K-Electric were outlined as Rs225 billion, originating from a principal amount of just Rs38.8 billion. It’s noteworthy that KE is also seeking additional receivables from government entities, including provincial departments, and the two parties are currently engaged in negotiations through arbitration for settlement.

The report revealed that total payables to power producers decreased by 11.7 percent to Rs1.608 trillion in November 2024, down from Rs1.822 trillion in November 2023. Liabilities held in PHPL (Power Holding Private Limited) also fell by 10.7 percent, dropping to Rs683 billion from Rs765 billion over the same period. Payables from generation companies to fuel suppliers saw a slight decline from Rs91 billion to Rs90 billion.

Moreover, the budgeted amount for unpaid subsidies decreased to Rs5 billion during the July-November period of the current year, compared to Rs10 billion in the same timeframe last year. Consequently, the government has paid Rs70 billion in interest to banks this year, an increase from Rs63 billion paid last year, largely due to a higher interest rate environment.

Also read: Power sector debt soars to Rs2.655 trillion

The latest report noted an increase of over 34 percent in losses attributed to distribution companies (discos), amounting to Rs94 billion in the first month of this fiscal year, compared to Rs70 billion in the same period the previous year. However, their under-recoveries were halved, falling to Rs76 billion from Rs153 billion during the first five months of the last fiscal year. The total losses for the five-month period were calculated at Rs276 billion, with under-recoveries totalling Rs315 billion.