DISCO losses threaten gains in Power Sector
Pakistan’s power sector saw PKR 265 billion in distribution inefficiencies in FY25, threatening to undermine the year’s record PKR 780 billion drop in circular debt
Staff Report
Persistent distribution losses continue in power distribution companies (Discos) which posted technical and commercial losses of PKR 265 billion in FY25, a slight improvement from PKR 276 billion in FY24.
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Optimus Research in a report said that under-recoveries improved sharply, falling to PKR 132 billion from PKR 315 billion the previous year. Analysts warn that without significant operational reforms, these inefficiencies could quickly reverse recent debt reductions.
Debt sees record reduction
The Ministry of Energy reported outstanding circular debt at PKR 780 billion in June 2025, down from PKR 1.56 trillion in June 2024 and PKR 2.34 trillion in June 2023. The decline was primarily driven by PKR 801 billion in stock payments to Independent Power Producers (IPPs) under renegotiated and terminated agreements, along with budgeted subsidy releases.
Payables decline
Payables to power producers fell sharply to PKR 861 billion at end-June 2025 from PKR 1.6 trillion the previous year.
Despite progress, arrears remain, with K-Electric’s non-payment adding PKR 4 billion.
Year-to-date debt movement
The PKR 780 billion net debt reduction was shaped by several factors:
- Positive factors: reduced under-recoveries (PKR 132 billion), lower inefficiencies (PKR 265 billion), budgeted but unreleased subsidies (PKR 28 billion).
- Negative factors: stock payments to IPPs (PKR 801 billion), pending generation costs (PKR 85 billion), unbudgeted subsidies (PKR 63 billion), interest charges on PHL and IPPs (PKR 58 billion), PHL principal repayments (PKR 24 billion), unpaid markup, and K-Electric arrears.
Energy sector specialists caution that the PKR 780 billion debt cut in FY25 will not be sustainable unless DISCO performance improves and generation costs are settled promptly.GENCOs Default to PSO, SNGPL Irks Minister
