ISLAMABAD: Pakistan’s circular debt in the energy sector reached Rs2.6 trillion in March 2022 mainly because of capacity payments to the power-producing entities like independent power producers (IPPs) and Wapda, and volatility in fuel prices (oil and coal) on the international market, WealthPK reported.
The supply chain of electricity distribution in Pakistan begins with petroleum companies, which sell their products to electricity-producing entities like IPPs and Wapda, which then sell electricity to government-owned distribution companies (Discos) that distribute electricity to homes, industries, etc., and bill them on a monthly basis.
Due to line losses and low recovery of bills, the Discos are unable to pay the electricity-producing entities, who then are unable to pay the fuel companies. So, this vicious cycle causes piling up of circular debt.
Pakistan’s total installed capacity of electricity was 37,261MW in the fiscal year 2020-21, which was 4% (1,289MW) higher than the previous fiscal 2019-20.
Electricity generation reached 102,742GWh in 2021.
Pakistan’s present energy mix consists of 12.2% indigenous gas, 26.5% hydel, 16.8% residual fuel oil (RFO), 19.7% RLNG, 6.7% nuclear, 4.4% renewables, and a minimum amount of imported electricity. The total consumption of electricity was 84,600GWh in 2021. As shown in the graph, the electricity consumption added additional 4,413 units GWh in FY21
Pakistan heavily relies on imported fuels, whose prices are volatile on the international market, for generating electricity. Pakistan’s power sector consumed 15.4% of the country’s total oil consumption in the first eight months of FY2021-22, according to Oil Companies Advisory Council. –INP
