Pakistan’s power sector faces an alarming crisis, marked by escalating circular debt, inefficiencies in governance, and soaring electricity costs. Despite efforts like a recent anti-theft campaign and regulatory interventions, the sector remains plagued by financial mismanagement, systemic overbilling, and operational lapses.

The National Electric Power Regulatory Authority (NEPRA) latest “State of the Industry Report 2023-24” provides a grim assessment, emphasizing the urgent need for comprehensive reforms to avert further economic and social fallout. The burden of these failures has left consumers grappling with inflated tariffs and unreliable service, underscoring the necessity of swift and decisive action to secure the nation’s energy future.

The energy sector grapples with an intricate web of challenges, with exorbitant electricity tariffs, entrenched inefficiencies, and a spiraling circular debt crisis weighing heavily on its consumers. The ex-WAPDA distribution companies (DISCOs) contributed a staggering Rs591 billion to the burgeoning circular debt in FY2023-24, predominantly driven by substantial transmission and distribution (T&D) inefficiencies and inadequate recovery of billed dues.

The report further underscores systemic malpractice, particularly pervasive overbilling, which artificially inflates T&D losses and creates illusory receivables. Honest consumers have been burdened with a Circular Debt Surcharge of Rs3.23 per unit, effectively penalizing them for the defaults of others. Even the much-touted anti-theft campaign, spanning September 2023 to September 2024, yielded a mere Rs23.574 billion—a figure dwarfed by the sector’s staggering unpaid dues.

The analysis provides a granular dissection of the generation, transmission, distribution, and supply mechanisms, reiterating the exigency for reformative measures to establish efficiency and financial sustainability. As of June 30, 2024, circular debt had swollen to an alarming Rs2.393 trillion, propelled by escalating T&D losses and a widening collection shortfall. DISCOs’ receivables reached Rs2.017 trillion, compared to Rs1.727 trillion in the preceding fiscal year, reflecting the intensifying financial strain. Outstanding liabilities from defaulters alone totaled Rs1.095 trillion. Meanwhile, the sector reported financial hemorrhages amounting to Rs276.35 billion, far exceeding NEPRA’s prescribed thresholds.

Despite NEPRA sanctioning an investment of Rs163.1 billion for network fortification, DISCOs’ operational inefficiencies persisted, with T&D losses climbing to 18.31% in FY2023-24, up from 16.84% the previous year. This far exceeded NEPRA’s target of 11.77%, further magnifying the crisis.

Although Pakistan’s installed power generation capacity rose to 45,888 MW by the close of FY2023-24, only 33.88% of this capacity was operationalized, leaving 66.12% unutilized. This inefficiency burdened consumers with exorbitant tariffs, as generation costs accounted for roughly 83% of end-user rates. Addressing the idle capacity conundrum remains imperative for reducing electricity prices.

Transmission bottlenecks inflicted Rs60.386 billion in losses, while underutilized facilities like Lucky Electric Power Company Limited added another Rs15 billion, primarily due to the lack of local Thar coal. Meanwhile, consumers paid an additional Rs15.28 per kilowatt-hour in supplemental charges during FY2023-24. Operational flaws at the Guddu 747 plant compounded the sector’s woes. Running the plant

in open cycle mode led to Rs7.9 billion in losses, while the absence of its steam turbine added a staggering Rs86 billion to generation costs. Furthermore, Non-Project Missed Volume (NPMV) payments and Part Load Adjustment Charges (PLAC) exacerbated financial hemorrhages, accounting for Rs39.5 billion and Rs55.671 billion, respectively.

The report paints a grim picture of a sector plagued by inefficiencies, mismanagement, and policy inertia. Addressing these multifaceted challenges demands not only structural reforms but also an unwavering commitment to accountability and systemic overhaul.

The government launched an extensive campaign to combat rampant electricity theft. While enforcement measures, including arrests and financial penalties, were implemented, the campaign’s recoveries totaled a mere Rs23.574 billion— a fraction of the sector’s staggering unpaid dues. Beyond financial setbacks, the campaign also highlighted severe safety deficiencies, with 146 fatal accidents reported during FY2023-24.

In response to the deepening crisis, the National Electric Power Regulatory Authority (NEPRA) has called for urgent reforms. Among its recommendations are granting operational and administrative autonomy to DISCOs to enhance governance and efficiency. It also suggested conducting bi-annual performance evaluations of DISCOs’ boards of directors and senior management, utilizing key performance indicators (KPIs) to ensure accountability and drive improvement.

The regulatory body also uncovered systemic overbilling practices inflating transmission and distribution (T&D) losses through fabricated receivables. Despite imposing penalties on DISCOs and K-Electric (KE), resistance to meaningful reform persists, compounded by the absence of full-time managing directors and CEOs in pivotal public sector organizations, further hindering operational progress.

The performance of the National Transmission and Despatch Company (NTDC) has also been scrutinized. A high-profile project—a 660 kV high-voltage direct current (HVDC) transmission line designed to optimize power flow from southern to central Pakistan—was utilized at only 38% capacity. This underutilization led to an average per-unit cost of Rs7.39, with end-users bearing an additional Rs97.833 billion in capacity payments.

Public sector generation companies (GENCOs) have exacerbated the sector’s inefficiencies. Notably, the Guddu 747 plant has remained non-operational for prolonged periods, forcing reliance on costlier alternatives. GENCO-II’s outdated open-cycle operations further strain resources, producing power at 1.5 times the cost of modern combined-cycle plants, compounding financial losses.

The report advocates sweeping reforms to address the systemic issues. Key proposals include granting greater autonomy to DISCOs, strengthening governance through regular performance evaluations, and improving billing and revenue collection mechanisms. Without immediate intervention, the escalating circular debt crisis and governance deficiencies will continue to erode the sector, leaving consumers to shoulder the ever-growing burden.

The broader implications for the nation are alarming. In a country where electricity affordability remains a pressing concern, the current trajectory of Pakistan’s power sector is economically unsustainable. The report emphasizes the urgent need for privatizing underperforming public entities, enforcing strict compliance with commercial contracts, and fostering competition through initiatives like the Competitive Trading Bilateral Contract Market. While these measures are steps in the right direction, their timely implementation is essential to alleviate the burden on consumers and prevent further deterioration of

the energy sector.

The power sector stands at a critical crossroads. While NEPRA’s recommendations, including governance reforms, enhanced operational autonomy for DISCOs, and competitive market frameworks, offer a roadmap for revival, their success hinges on unwavering political will and effective implementation. Privatization of underperforming entities, stricter compliance measures, and investments in modernized infrastructure are paramount to overcoming the sector’s entrenched inefficiencies. Without these reforms, the weight of systemic failures will continue to stifle economic growth and deepen the plight of consumers. Now is the time for bold, transformative action to unlock the path toward an efficient, affordable, and sustainable energy future.