Power sector circular debt rises Rs61 billion to Rs1.67 trillion in FY26, Discos' inefficiencies remain top driver

Profit reported that the power sector's circular debt climbed by Rs61 billion in FY2025-26, reaching Rs1.675 trillion on June 30, 2026, against Rs1.614 trillion twelve months before. Inefficiencies and weak bill collection at distribution companies, known as Discos, were the sector's largest structural problem, adding Rs326 billion over the year. Power Division figures show Discos' operational inefficiencies accounted for Rs262 billion, slightly below the Rs265 billion of the previous year.

Another big driver was K-Electric falling behind on payments, which added Rs194 billion to the balance. The utility's receivables totalled Rs421 billion at the end of June 2026, comprising Rs197 billion of principal and Rs224 billion of accrued markup. Weak recoveries added Rs64 billion, far less than the Rs132 billion recorded in FY25. Pending invoices from the Water and Power Development Authority (Wapda), linked to revised power purchase agreements, added Rs63 billion more.

Gross additions reached Rs609 billion over the year, while reductions of Rs247 billion brought the net circular debt flow to Rs364 billion. Unclaimed subsidies accounted for Rs98 billion of the reductions, loan principal repayments for Rs129 billion and pending generation cost adjustments for Rs20 billion. The government later released Rs302 billion in subsidy payments, though power producers were still owed Rs784 billion on June 30, 2026. Generation companies owed fuel suppliers Rs90 billion, while circular-debt financing made up another Rs801 billion of the balance.