Circular Debt Rises By Rs. 600 Billion Per Year Due to DISCOs’ Inefficiencies

Electricity distribution companies (DISCOs) are adding over Rs. 600 billion annually to the country’s circular debt, which now stands at Rs. 2.467 trillion. Despite recovery claims of 92.44 percent, inefficiencies in the system have made circular debt worse. DISCOs recover 10-15 percent of billed electricity through overbilling to artificially boost recovery rates but actual losses are huge. Pending bills from private and public sector consumers have spiked by 69.64 percent since 2021 to Rs. 2.017 trillion. Defaulters, including influential political and industrial entities, owe Rs. 1.094 trillion, up from Rs. 900.82 billion in FY2023. Meanwhile, profit-making DISCOs like IESCO, GEPCO, LESCO, and MEPCO have been forced to provide Rs. 125.78 billion in cross-subsidies to loss-making companies, however, no measures have been taken to stop this. In FY24, transmission and distribution losses above regulatory allowances cost the sector Rs. 276.35 billion, while shortfalls in the recovery of billed amounts added Rs. 314.506 billion to the circular debt.