ISLAMABAD: The Power Division has acknowledged that it was unable to combat mismanagement and inefficiencies in the energy industry, leading to the buildup of circular debt exceeding Rs2.310 trillion.
The division is now placing its bets on the establishment of intelligence and law enforcement authorities’ support units for electricity distribution companies (DISCOs) in order to deal with issues and reduce circular debt.
It was estimated that during the financial year 2023–24, those companies may have suffered a loss of about Rs589 billion, which included under-recoveries and losses above the threshold defined by the National Electric Power Regulatory Authority (Nepra). Receivables of DISCOs had piled up to Rs1.786 trillion, making the sector unviable.
The Power Division briefed the Cabinet Committee on Energy during a recent meeting on how to strengthen DISCO management and create support units. Following the unbundling of the Water and Power Development Authority (Wapda), 11 DISCOs nationwide—Karachi being served by a private company—were given the task of distributing electricity.
The Ministry of Energy’s Power Division overseeing DISCOs has always faced difficulties in managing them effectively. A number of models had been used in the past to try to improve DISCOS, but the outcomes of these experiments were not worthwhile. As a result, inefficiencies have plagued the electricity industry for many years.
It was reported to the committee that it caused circular debt to exceed Rs2.310 trillion. It was anticipated that the distribution system would advance since DISCOs were established to facilitate the adoption of the corporatization model and speedy service delivery.
However, necessary improvements have been stalled because of widespread mismanagement. As a result, the public exchequer is now continuously bleeding from these corporations.
On September 7, 2023, the government began a drive to reduce losses by stopping electricity theft and collecting payments from defaulters. Nonetheless, despite backing from the federal and local governments, there was concern that DISCOs might not be able to produce the expected outcomes.
According to the Power Division, during meetings on April 24, 2024, and May 13, 2024, the Special Investment Facilitation Council (SIFC) executive committee considered and floated the idea of creating support units for DISCOs as a means of improving the situation.
The division emphasized the importance of support units in bolstering DISCO management and ensuring effective monitoring.
