The power sector’s circular debt has increased by Rs. 303 billion to a staggering Rs. 2.6 billion during the first four months (July-October) of the financial year 2022-23.
The circular debt has increased by over Rs. 75 billion per month (average) due to base tariff hikes, Fuel Cost Adjustments (FCAs), quarterly tariff adjustments (QTAs), and minimal recoveries made by distribution companies (DISCOs) mostly in Balochistan, some parts of Khyber Pakhtunkhwa, South Punjab and interior Sindh, according to a report by a national daily.
The circular debt volume was Rs. 1.730 trillion. Still, after adding Rs. 825 billion in loans on the books of Power Holding Private Limited (PHPL), the total amount of circular debt was Rs 2.555 trillion.
The report added that a major contributor to the significant increase in circular debt is K-Electric’s (KE) payables. The current government has already paid approximately Rs. 200 billion to power sector companies in recent months to reduce the spiraling debt, but it is still growing at an abnormal rate.
Circular debt increased by Rs. 185 billion in the first quarter of FY23, compared to Rs 99 billion in the same period of FY22. As mentioned earlier, circular debt increased by Rs 284 billion in the first four months of the current fiscal year, excluding PHPL.
Another factor contributing to the increase in the circular debt volume is the massive amount of outstanding receivables of DISCOs despite recovery targets of more than 100 percent. Since the energy regular started collecting power data, it has been observed that DISCO receivables have been one of the major issues.
Pertinently, the receivable amount of DISCOs including KE was around Rs. 1.398 trillion in FY21, and Rs. 1.6804 trillion in FY22, indicating an Rs. 282.2 billion increase.