Circular Debt Soars Over Rs2 Trillion Despite Significant Tariff Hikes

Web DeskSeptember 20, 20235082 min

Despite major pricing increases, Pakistan’s electricity industry debt increased from Rs2.25 trillion in the previous fiscal year (FY22) to Rs2.31 trillion by June 2023. In contrast to FY22, when the debt actually reduced by Rs27 billion, this growth of Rs57 billion (or nearly 3%) over a year is significant.

The main ideas are broken down as follows:

By June 2023, the debt has increased to Rs2.31 trillion from Rs2.25 trillion in FY22.

In FY22, generation companies owed fuel providers Rs101 billion, power producers Rs1 351 billion, and Pakistan Holding Limited (PHL) retained Rs800 billion.

While the debt to PHL reduced to Rs765 billion in FY23, the debt to power producers climbed to Rs1,434 billion in FY22-23.

Some subsidies were cut by Rs. 12 billion in FY22, but there were none left in FY23.

Independent power producers (IPPs) accrued interest on overdue payments of Rs 100 billion by the end of FY23 after rising to Rs 105 billion in FY22.

PHL increased the markup on IPPs’ claims from Rs29 billion in FY22 to Rs43 billion in FY23.

The cost of pending generation, which includes fuel costs and tariff changes, dropped from Rs414 billion in FY22 to Rs250 billion in FY23.

K-Electric’s unpaid balance decreased from Rs107 billion in FY22 to Rs53 billion in FY23.

But in FY23, power distribution firms (Discos) reported a surge in their efficiency-related losses from Rs133 billion to Rs160 billion.

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