Power Division energy reforms for sharp reduction in circular debt, distribution losses

ISLAMABAD: The Power Division has said that ongoing reforms in Pakistan’s energy sector have led to a significant reduction in circular debt and distribution company losses over the past two years, describing the improvement as evidence that the government’s reform agenda is producing sustainable results.

According to a spokesperson for the Power Division, the power sector’s circular debt declined from Rs2,393 billion in FY2023-24 to Rs1,614 billion in FY2024-25, reflecting a substantial improvement in the sector’s financial position.

The spokesperson said that Rs893 billion had been allocated for the power sector in the FY2025-26 federal budget, but Rs98 billion was later reduced. Had the allocated amount been released in full, the circular debt would have declined further to Rs1,577 billion, the spokesperson claimed.

The Power Division stated that the Rs98 billion budget cut resulted in an increase of Rs61 billion in circular debt during the current financial year.

The spokesperson also highlighted improvements in the performance of electricity distribution companies (DISCOs). According to the figures, distribution losses fell from Rs591 billion in FY2023-24 to Rs397 billion in FY2024-25, a reduction of Rs193 billion.

The Power Division further stated that losses have now been brought down to Rs326 billion during the current financial year, reducing total losses by Rs265 billion over the past two years.

The spokesperson said the continued decline in circular debt and distribution losses demonstrates that reforms introduced in the power sector are producing lasting positive results.

The statement added that the temporary increase in circular debt was linked to budgetary adjustments rather than shortcomings in the reform programme.

According to the Power Division, efforts will continue to strengthen the financial sustainability of the energy sector and improve the reliability of electricity services for consumers.