Pakistan power firms fail to recover Rs480bn dues

Electricity distribution companies left Rs. 480.6 billion in unpaid consumer bills during 2023–24, deepening Pakistan’s circular debt crisis.

Pakistan’s power sector faces renewed scrutiny after the Federal Audit Report on the Accounts of DISCOs for Audit Year 2024–25 revealed that electricity distribution companies failed to recover Rs. 480.6 billion from consumers in financial year 2023–24. The auditors highlighted chronic inefficiencies, weak governance, and poor enforcement as key reasons behind the mounting dues, warning that the crisis threatens the sector’s sustainability.

According to the audit, as of June 2024, 354,515 running consumers and 121,973 permanently disconnected defaulters collectively owed Rs. 480,558.75 million. Despite the magnitude of unpaid bills, management at the distribution companies made little effort to pursue recovery. The Ministry of Energy’s Power Division also came under criticism for failing to appoint sufficient recovery staff, with only six Tehsildar Recovery Officers deployed against sixty sanctioned posts.

The data showed that Sukkur Electric Power Company (SEPCO) topped the list with Rs. 218 billion in outstanding dues, followed by Quetta Electric Supply Company (QESCO) with Rs. 106.7 billion, Hyderabad Electric Supply Company (HESCO) with Rs. 55.2 billion, and the Tribal Areas’ TESCO with Rs. 83.7 billion. Even relatively better-performing firms reported major gaps: Peshawar’s PESCO left Rs. 12 billion unrecovered, Faisalabad’s FESCO Rs. 5.7 billion, Lahore’s LESCO Rs. 5.05 billion, and Multan’s MEPCO Rs. 3.8 billion. Islamabad’s IESCO recorded a smaller but notable Rs. 66 million in unpaid bills.

The report noted that many defaulters had been outstanding for over a year, yet companies showed little urgency in initiating legal or administrative measures. This failure, auditors stressed, not only weakens the financial position of distribution firms but also fuels Pakistan’s ballooning circular debt, which has surpassed Rs. 2.6 trillion. The circular debt arises when power producers are not paid by distribution companies, forcing the government to step in with subsidies or borrowing, costs that are ultimately passed on to paying consumers.

Energy experts have long warned that persistent defaults in the distribution system represent one of the most serious structural flaws in Pakistan’s power sector. Previous audit reports and parliamentary committees have raised similar concerns, but little progress has been made. In 2021, for instance, auditors highlighted Rs. 376 billion in unrecovered dues, a figure that has since swelled by more than 25 percent in three years.

The persistence of arrears highlights systemic weaknesses in the governance of DISCOs, where poor enforcement mechanisms, political interference, and tolerance of chronic defaulters undermine financial discipline. The absence of strong recovery mechanisms has created a vicious cycle: companies fail to collect their dues, government subsidies are used to plug the gap, and tariffs rise for compliant consumers, who in turn face increasing outages due to liquidity shortages in the sector.

The report also highlighted administrative lapses, particularly the failure to appoint adequate recovery officers. Experts argue that this reflects a wider problem of weak institutional capacity and lack of accountability. Without the appointment of dedicated staff and the empowerment of recovery teams, collection efforts are unlikely to improve.

The financial stress on distribution companies has direct implications for power producers and fuel suppliers, many of whom face delayed payments. This further disrupts electricity generation, compounding Pakistan’s frequent power shortages and load shedding. The inability to recover dues also undermines investor confidence in the sector, deterring much-needed private and foreign investment in energy infrastructure.

Public reaction to the findings has been critical, with consumer rights groups arguing that ordinary households are unfairly penalized through higher tariffs while powerful defaulters go unpunished. Social media commentary has drawn attention to repeated cycles of government bailouts, labeling them an unsustainable approach that rewards inefficiency.

The Federal Audit Report AY 2024–25 concludes that structural reforms are essential to break the cycle. These include strict enforcement of recovery, depoliticization of DISCOs, and the introduction of accountability mechanisms to prevent chronic defaults. Until such measures are taken, auditors warn, the hemorrhaging of revenue will continue, further deepening the crisis in an already fragile power sector.

Pakistan’s power sector, once considered a cornerstone of industrial growth, now stands as one of the leading causes of economic instability. Unless reforms are enforced and recovery strengthened, experts caution that the Rs. 480 billion shortfall could be only a precursor to deeper fiscal strains in the years ahead.