The All Pakistan Business Forum (APBF) has said that the power sector has been suffering Rs158 billion losses due to inefficiency and theft despite constant tariff hikes through annual and quarterly adjustments, and fuel cost adjustments, escalating cost of production for the industry. The APBF President Syed Maaz Mahmood, referring to the data of the Ministry of Energy, observed that distribution companies caused Rs106 billion in losses in the first half of the fiscal year due to inefficiency while more than half of the Rs158 billion losses were caused by just two power distribution companies HESCO and SEPCO. Syed Maaz Mahmood said that the cumulative losses due to under-recoveries and inefficiency amounted to Rs158 billion. These were partially offset by gains from monthly and quarterly tariff adjustments and prior-year recoveries. The government collected an additional Rs67 billion from quarterly and monthly fuel adjustments and another Rs140 billion through other price adjustments, according to the report. Experts added that HESCO and SEPCO alone contributed Rs82 billion of the Rs158 billion losses, with an increase of Rs28 billion from last year. This clearly means that the government’s policies to appoint independent Boards of Directors at State-Owned Enterprises are yielding results, they said. He said that the circular debt amounted to Rs2.384 trillion by the end of December, according to a report by the Power Division. The report further showed that after injecting Rs20 billion from the budget to reduce the stock of debt, there was a net reduction of Rs9 billion in circular debt compared to the Rs2.393 trillion level recorded in June 2024. The APBF Chairman Ibrahim Qureshi said that despite an overall marginal reduction in debt levels, there was still a net increase of Rs11 billion in the circular debt flow after adjusting the impacts of price increases and budgetary injections. The International Monetary Fund had allowed an addition of Rs461 billion in the flow, but the Power Division performed much better than that. Ibrahim Qureshi said that the primary challenge remained the losses caused by power distribution companies due to theft, inefficiency, and under-recovery of bills. These companies also caused Rs52 billion in losses due to under-recoveries, which was Rs97 billion less than the comparative period. The APBF President said that it is good that the government is working to resolve issues in appointing independent Boards of Directors for HESCO and SEPCO to further reduce losses. Maaz Mahmood suggested that the circular debt actually increased by Rs463bn in the first seven months of the current fiscal year, averaging Rs66bn monthly, compared to Rs408bn in the same period last year. However, after accounting for stock payments worth Rs137bn from June 2023 to January 2024, the net increase in circular debt was Rs325bn. The payables to power producers, which stood at Rs1.434tr at the beginning of FY2023, jumped to Rs1.77tr by the end of January 2023 and remained almost unchanged at Rs1.760tr by the end of January 2024 — a minuscule difference of Rs8bn. The stock of permanent debt guaranteed by the government of Pakistan remained unchanged at Rs765bn during the period. The increase in circular debt can be attributed to poor recoveries by distribution companies, high system losses, pending generation costs, non-payments by K-Electric, and interest charges, despite the government’s efforts to recover about Rs116bn from consumers in the previous year. While the government has been claiming improvements, the IMF has put on record that power sector circular debt at Rs2.6tr has remained broadly flat since October 2023 after some slippage earlier in the fiscal year (due largely to lower-than expected recoveries following the large annual tariff rebasing in July 2023).