ISLAMABAD: The National Assembly was informed on Monday that the power sector’s circular debt stood at Rs2.47 trillion as of May 2025.
In a written reply to a question of Syed HussainTariq, the Power Division presented the details of circular debt and informed the House about the government’s strategy to tackle the issue.
According to the details, inefficiencies in the distribution companies (DISCOs) is the major reason leading to high technical losses and under recoveries than the targets set in the tariff determined by the Nepra.
The other sources of increase in the debt are unbudgeted subsidies and financial cost (delayed payment charges) of payables to the power producers. The House was informed that a loan of Rs1,275 billion was being arranged to finance/refinance the current stock of circular debt. The tenure of the loan will be six years with the interest rate at 3-months KIBOR minus 0.9%.
The same will be paid through the Debt Service Surcharge already collected from the electricity consumers and included in the monthly bills as FCS. In order to stop the re-emergence of circular debt, multiple initiatives are being taken, including tariff renegotiations with the IPPs, privatization of four distribution companies, reduction in technical losses through
efficiency enhancement, liberalization of market, and future capacity additions on least cost basis. The financing cost will be met through Debt Service Surcharge (DSS) which is already being charged to the consumers.
Moreover, the DSS does not impact the fuel price adjustment mechanism, which is independent of DSS. The following measures are being taken by government to address the significant losses of Discos.
A strategic roadmap for FY25 to FY29 has been developed for reduction in losses and improvement in the recovery, implementation of computerized energy audits at the distribution transformer level to identify the high-loss areas, deployment of Advanced Metering Infrastructure (AMI) in phases for real-time monitoring and loss assessment, installation of energy meters for previously unmetered consumers to eliminate unauthorized consumption, implementation of Discos Support Units (DSU) in the distribution companies to streamline the operational control, introduction of a recovery incentive scheme for local administration and distribution companies to enhance arrears collection, installation of Aerial Bundled Conductors (ABC) in high-theft areas to mitigate illegal tapping and direct hooking, solarisation of agricultural tube wells in QESCO to reduce dependency on grid electricity and curb losses, and processing of recovery proceedings against permanently disconnected defaulters under the Land Revenue Act by the power distribution companies.
Replying to a question of Mirza Ikhtiar Baig, Minister for Power Division Awais Leghari said the industrial consumers were currently cross-subsidizing vulnerable domestic consumers. However, keeping in view the economic growth and competitiveness, in annual rebasing of FY2024-25, the industrial cross subsidy burden had been reduced.
Prospectively, the government was working on direct subsidy scheme eliminating the need for cross subsidy, he said. In June 2024, the national average electricity tariff, including taxes, was Rs48.70 per kWh, while by June 2025, it decreased to Rs38.39 per kWh, reflecting a reduction of Rs10.31 per kWh.
The House was told in the written reply that renegotiating agreements with 36 independent power producers and GPPs, including termination of six IPPs, had already led to a reduction in the consumer end tariff and savings of Rs3,696 billion over the life of the projects.
Negotiations with other IPPs are also under process and the relief shall be passed on to the consumers once finalized. Further, it was clarified that the distribution companies’ inefficiencies were not being passed on to the consumers.
Naeema Kishwar questioned the impact of exceeding the 200-unit electricity consumption threshold, noting that even a single additional unit results in a significantly higher bill. Leghari responded that extending the lifeline consumer limit to 300 units will require a subsidy of Rs275 billion.
He further informed the House that the electricity charges for households using up to 200 units a month had dropped by about 60 percent over the past nine months. He said out of 35 million electricity users, around 18.3 million were already receiving subsidies — 90 percent for those consuming up to 100 units, and 70 percent for those using between 100 and 200 units.
Shazia Sobia raised the issue of overbilling, alleging that it appeared the entire bill of Parliament Lodges had been added to her bill. She also highlighted the load-shedding problem in her constituency.
Speaker National Assembly Sardar Ayaz Sadiq directed the energy minister to resolve the matter. Leghari further informed the House on a supplementary question that the power tariff had been reduced from Rs48.7 to Rs38.4 per unit.
He said the government had reduced the burden of cross-subsidies and lowered the tariffs for protected consumers. “We are moving toward a system without cross-subsidies, and bulk power consumers will be able to purchase electricity directly,” he added.
In a written reply to a question, Leghari told the House that the total installed capacity of electricity in the country was 38529.678 Kwh during the Fiscal Year 2024-25.
Replying to another question, Leghari said the government was working on a proposal for surplus power package for industrial and agricultural consumers in alignment with the Bijli Sahulat Package for the next three years.
The energy minister said an incremental consumption package aimed at providing discounted electricity rates on incremental usage was being developed. He said it was under consideration that the greenfield industries, including data centers and crypto mining operations, will benefit from the proposed package on their entire consumption, subject to specific terms and conditions. He said the proposed surplus power package will be available to all industries including export industry on incremental consumption rates.