Circular debt is a power sector deficit; shortfall in inflows and outflows at the CPPA-G. It is because of inefficiencies, delays in tariff determination/ decision-making, taxation issues, administrative and governance issues. It is huge and increasing as there is no serious effort to curtail it. The only effort government made over the years is to increase consumer tariff; which in itself is distortionary. Uniform tariff and subsidies act as a disincentive for DISCOs to improve efficiency. Instead of increasing sales to minimize the impact of huge capacity payments, DISCOs have started revenue-based load shedding. There are no performance contracts with energy companies.
Development Challenges of Pakistan, Constraints & Choices
August 20, 2024
