CCOE weighs debt reduction

The Power Division has said that the reduction in financial allocation by K-Electric has caused an increase in circular debt in the power sector. The Ministry of Energy (Power Division) recalled that the Cabinet Committee on Energy (CCOE), in its meeting held on January 14, 2025, had directed the division to present figures of billing, collections and circular debt every quarter for its consideration. It was informed in a recent meeting of the CCOE that the committee had also directed the National Electric Power Regulatory Authority (Nepra) to ensure the integrity of data contained in the report. It was pointed out that the circular debt report for January, February and March 2026 had been shared with Nepra and the Finance Division. Later, the Finance Division communicated that the dispute with K-Electric may be resolved under the relevant Nepra Act/regulations. Meeting participants reviewed the performance of power distribution companies vis-a-vis Nepra targets and compared to last year. It noted that circular debt statistics as of the end of financial year 2025-26 had been finalised. The Power Division submitted the verified data of circular debt for the third quarter (January-March 2026) and the full financial year 2025-26, which ended on June 30, for consideration of the CCOE. During discussions, the division gave details of circular debt targets and the actual results by June 2026. It was highlighted that the circular debt position was positive as it stood at Rs1,798 billion, which was lower than the target of Rs1,802 billion, with a positive variance of Rs4 billion. The actual gross flow of circular debt was Rs420 billion against the target of Rs400 billion, with a negative variance of Rs20 billion, while DISCOs' inefficiency, comprising transmission and distribution losses and under-recoveries, was calculated at Rs176 billion against the target of Rs254 billion, which reflected a favourable variance of Rs78 billion. The energy committee was informed that the major factors constraining debt reduction were mainly the non-payment by K-Electric of Rs171 billion (CPPA-G invoice of Rs148 billion plus late payment surcharge of Rs23 billion), and the fuel cost power surcharge of Rs13 billion. Had full payments been received, the circular debt would have decreased by Rs175 billion. The cabinet body on energy reiterated its directives to the Power Division to seek all organisational ways to improve the financial performance through improved operational efficiency and reduction in expenditures, particularly in the power sector, to slash the cost of electricity for consumers. The Power Division assured the committee that all necessary steps would be taken to address the circular debt. The CCOE considered the circular debt report for January, February and March 2026 and the annual report for the year ended June 2026. It also examined a summary titled "Circular Debt Report for the months of January, February and March 2026" and directed the Power Division to expedite reforms to check future slippages and deficits in the sector. After deliberations, the Ministry of Energy (Power Division) concurred that it would accelerate the pace of power-sector reforms.