September 08, 2023 (MLN): Pakistan's power sector has grappled with a staggering subsidy burden, reaching a figure of approximately Rs3.4 trillion in a span of 12 years.
On average, an annual subsidy of Rs283 billion has been disbursed in this sector, underscoring the significant financial support required to sustain it.
By the end of June 30, 2023, the circular debt plaguing Pakistan had escalated to an alarming level of Rs2.3tr.
To note, the circular debt was estimated to be around Rs1.2tr at the beginning of the year.
The rapid increase in circular debt underscores the deep-rooted financial challenges that the power sector faces.
Earlier, in order to control the Ginnie of circular debt, the government had increased the power tariff substantially but failed miserably.
The surge in circular debt is also attributed to the regime of increasing interest rates as the major portion of circular debt is independent power producers' (IPPs) receivables. If the interest rate is hiked, the circular debt keeps piling up.
