Daily Times

The Ferozepur Road Industrial Association (FRIA) has raised its serious concern over power distribution companies’ huge losses of billions of rupees in the first half of the fiscal year due to inefficiencies, which need to be taken care of seriously.

FRIA Chairman Shahbaz Aslam 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 FRIA Chairman said that it is good that the government is working to resolve issues in appointing independent Boards of Directors for DISCOs to further reduce losses.

Shahbaz Aslam 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.

The business leader 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 discos 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.