Islamabad claims that K-electric owes over 225 billion rupees to the national exchequer, with approximately 83 percent of this amount comprising a markup on principle liability.

 

K-electric faces a staggering 186.5 billion rupees in markup fees, over their liability of just 38.8 billion rupees. However, K-electric also claims additional receivables from the government.

 

Currently, both entities are engaging in talks to draw up a plan for the direction and magnitude of the repayment amount. Resolving the repayment matter via negotiations concerns the areas that K-electric serves. If the talks require K-electric to pay the extortionate amount, the company's cash flows could get strained.

 

Reports indicate that loss-related inefficiencies in the power sector deteriorated by a whopping 35 percent. Coupling this with K-electric’s expected repayments, players in the energy sector could try to increase the price of electricity. This spells bad news for businesses as electricity prices are already sky-high because of the 155 percent rise in tariffs over the past three years.

 

In its monthly report, the power division revealed that circular debt in the power sector dropped by 11 percent in November 2024 compared to the same period in 2023. The new circular debt stands at 2.381 trillion rupees making it more manageable for Islamabad compared to the old value of 2.678 trillion rupees.

 

Payables to fuel suppliers, power producers and debt parked in PowerHolding Ltd fell significantly as per reports. The fall in debt stems from the inflated quarterly tariff and fuel price adjustments, which allowed for an ‘over-collection’. Furthermore, various adjustments collected an additional 234 billion rupees due to prior year recoveries.

 

According to the power division’s report, K-electric’s owes a total of 59 billion rupees to the national exchequer. Accounting for markups, the power division claimed 225 billion rupees in receivables from the company.

 

The report further elaborated that payables to power producers dropped by approximately 12 percent from 1.8 billion rupees in November 2023 to 1.6 trillion rupees in November 2024. This drop indicates that the power sector has reduced its debts compared to the past year, showing Islamabad’s commitment to improving the financial health of the power sector.

 

However, the debt report has revealed that inefficiencies faced by power distributors (Discos) were responsible for a staggering loss of 94 billion rupees during the first month of FY 25. If discos continue to operate at such losses, the next debt report might witness an increase in circular debt instead.