Power division pins blame for circular debt on ‘Q Block’

ISLAMABAD: The power division on Tuesday blamed the Ministry of Finance for a Rs61 billion increase in power sector circular debt, which rose to Rs1.675 trillion by June 30 this year from Rs1.614tr a year earlier. “Due to the budget deduction of Rs98bn, the circular debt witnessed an increase of Rs61bn” during FY2025-26, the power division said in a statement. It did not release the end-year financial report, which is pending regulatory and statutory approval. As such, the power sector circular debt, excluding K-Electric, concluded the fiscal year at Rs1.675tr. Under the International Monetary Fund programme, the government has committed to no increase in circular debt flow and a gradual reduction in its stock. The end-December 2025 target under the programme was met and appreciated by the IMF. The power division said a total of Rs893bn was allocated for the power sector in the federal budget for FY26. “However, a deduction of Rs98bn was subsequently made. Had the power sector received the full allocated budgetary payment, the circular debt would have further reduced to Rs1.577tr,” it said. Budget documents presented to parliament showed that Rs1.036tr was actually allocated for power sector subsidies, which was later reduced to Rs893bn at the time of presentation of the FY27 budget.

The power division statement, however, indicated that a further Rs98bn cut was imposed as part of the austerity policy before the current-year budget was passed, effectively reducing the power sector subsidy to Rs795bn. The statement recalled that the power sector’s circular debt had decreased from Rs2.393tr in FY24 to Rs1.614tr in FY25. It said losses of power distribution companies, which stood at Rs591bn in FY24, were reduced by Rs193bn to Rs397bn in FY25. “During the current fiscal year, the power division has further reduced these losses from Rs397bn to Rs326bn,” it said, adding that over a two-year period, overall losses were curtailed by Rs265bn, bringing them down from Rs591bn to Rs326bn. “This reduction clearly demonstrates that the reforms implemented in the power sector are proving effective and yielding sustained positive outcomes,” the power division claimed. It added that the numbers confirmed that the reform process within the energy sector was progressing effectively. The division said the budget deduction was merely a temporary financial factor rather than a reflection of any operational decline. It said it remained committed to executing its reform agenda to ensure that the energy sector became financially sustainable and reliable for consumers. Published in Dawn, July 29th, 2026