Power Division rejects Rs223bn Circular Debt claims

January 26, 2026 (MLN): The Ministry of Energy’s Power Division has dismissed claims of a Rs223 billion increase in circular debt, calling the reports wrong, misleading, and devoid of factual context.

In a clarification issued on Monday, the Power Division spokesperson referred to a media report suggesting that circular debt (CD) flows rose by Rs224 billion during July–November 2025, despite a bank refinancing agreement signed in September 2025.

The spokesperson said the report failed to present updated data and was published without seeking the Power Division’s version.

The spokesperson emphasized that comparing the circular debt stock as of June 30, 2025, with end-November 2025 figures is inappropriate, as the latter covers only three months.

The variation, the statement said, was wrongly linked to bank agreements that were primarily aimed at replacing expensive PHPL debt with cheaper financing, repayable over five to six years.

Ideally, the July–November 2025 period should have been compared with July–November 2024, the Power Division said, noting that seasonal factors typically influence monthly circular debt movements.

Such seasonal increases are usually reversed by the end of the fiscal year, it added.

The Power Division further clarified that circular debt flow declined in December 2025, resulting in a net CD flow of less than Rs80 billion during July–December 2025.

The statement also acknowledged that circular debt stock had declined significantly during FY2024–25, reaching Rs1,614 billion as of June 2025, supported by improved DISCO operational efficiencies, stronger macroeconomic conditions, and the waiver of late payment interest following successful negotiations with Independent Power Producers (IPPs).

Looking ahead, the Power Division expressed confidence that the circular debt position would be fully contained by the end of the current fiscal year, with no net addition to the overall stock, in line with historical trends.

The statement also stressed that seasonal variations in circular debt flows have no implications for consumer-end electricity tariffs, and therefore do not affect end-user pricing.

Additionally, DISCO inefficiencies during FY2024–25 were reduced by Rs193 billion compared to FY2023–24, while inefficiencies during July–December 2025 declined by a further Rs49 billion compared to the same period last year.

The Power Division reiterated the government’s commitment to enhancing operational efficiency and maintaining financial discipline in the power sector.

It also noted that the Rs1,225 billion Circular Debt Settlement Plan will be implemented over six years, under which existing circular debt stock will be refinanced at favorable terms.

While the first tranche has yet to be received, the circular debt stock is expected to be eliminated over the next six years, alongside the discontinuation of the Debt Service Surcharge.

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