Federal Govt Considers Power Dues Adjustment via NFC as Power Losses Drop by 40% - Bio Points News

Power Dues Adjustment via NFC: Federal Government’s Strategic Decision

ISLAMABAD — On Monday, the federal government discussed the possibility of adjusting the outstanding electricity dues of provincial governments through the National Finance Commission (NFC) award. The review came after a significant reduction in power sector losses, which were reported to be Rs221 billion — a 40% decrease compared to previous figures.

The discussions were part of the Economic Coordination Committee (ECC) of the Cabinet’s meeting, where officials from the Power Division shared the latest performance data of the country’s power distribution companies (DISCOs). Despite some mixed results in reducing distribution losses, improvements in bill recovery were noted for the July-March period of the current fiscal year.

Performance Review of Power Sector Losses

The federal government, in collaboration with the Power Division, highlighted that while the recovery of outstanding bills improved, the total distribution losses during the period remained a significant challenge. The National Electric Power Regulatory Authority (Nepra) had set clear targets for these companies, which, according to the federal officials, were still being breached.

Sardar Awais Laghari, the Federal Minister for Power, pointed out that, despite the challenges, the country was able to limit power sector losses to Rs221 billion, a marked improvement compared to the initial projection of Rs390 billion for the same period. He also noted that the losses were Rs143 billion lower (a 40% reduction) compared to the same period in the previous fiscal year.

However, Minister Laghari emphasized that Hyderabad and Sukkur distribution companies were lagging in performance, and this was primarily due to an understanding reached between the Pakistan Peoples Party (PPP) and the government, which had led to the boards of these companies not being replaced during the restructuring efforts.

Provincial Governments’ Electricity Dues

One of the key points raised during the ECC meeting was the outstanding electricity dues of provincial governments. As of the latest update, the four provincial governments owed a significant amount to the national power companies, with Sindh topping the list.

The outstanding dues as of September of the previous year were reported as follows:

• Sindh: Rs59.7 billion

• Balochistan: Rs39.6 billion

• Punjab: Rs38 billion

• Khyber Pakhtunkhwa: Rs8.9 billion

To address this issue, the federal government instructed the Finance Ministry to explore mechanisms that would allow for the adjustment of reconciled dues from the provinces against their respective shares under the NFC award, once the dues were confirmed by the provincial governments. This strategy aims to address non-payment issues while maintaining fairness in resource distribution.

In December 2024, the federal government had urged provincial governments to clear these outstanding bills to avoid disruptions in power supply and to safeguard the national economy from further financial losses.

Circular Debt and Other Key Decisions

In addition to the power dues adjustment, the ECC also discussed measures to address the issue of circular debt, which has remained a persistent challenge in the energy sector.

The circular debt for the first nine months of the fiscal year had seen a minimal increase of only Rs2 billion, which was a remarkable improvement compared to the Rs411 billion increase that had been initially forecasted. As of the end of March 2025, the total circular debt stood at just under Rs2.4 trillion.

Minister Laghari noted that better performance of the distribution companies had led to this stabilization of circular debt. He also acknowledged the role of improved recoveries from private sector consumers in achieving these results.

Other significant decisions discussed during the meeting included the extension of sovereign guarantees for Sui Northern Gas Pipelines Limited (SNGPL). These guarantees, which were issued against running finance facilities of Rs50 billion for LNG payments, were extended until June 2026 based on improved cash flows from the company.

Solarisation of Agricultural Tube-Wells in Balochistan

Another key issue taken up by the ECC was the solarisation of 27,000 agricultural tube-wells in Balochistan, a project aimed at reducing the dependency on grid power for farming needs in the province. The project, which was approved by Prime Minister Shehbaz Sharif in July 2024, is part of the government’s broader push to promote renewable energy and reduce energy costs for the agricultural sector.

The solarisation project is expected to cost Rs55 billion, with the federal government bearing 70% of the subsidy. A total of Rs14 billion has already been released, and the ECC approved the remaining Rs24.5 billion in funding to ensure the continuation of this important project.

The committee also instructed the Power Division to closely monitor the project’s implementation, particularly the disconnection of tube-wells from the grid and removal of transformers and fixtures in line with the project’s objectives. Progress on the project will be reviewed again by the ECC in July 2025.

A Strategic Approach to Power Sector Challenges

The discussions in the Economic Coordination Committee (ECC) reflect a strategic approach to addressing Pakistan’s power sector challenges, including outstanding dues from provincial governments, circular debt management, and efforts to reduce distribution losses. The proposed adjustment of dues via the NFC award highlights the government’s focus on maintaining financial discipline while ensuring fairness across the provinces.

Despite positive developments in the power sector’s financial performance, challenges remain, particularly regarding the performance of Hyderabad and Sukkur power distribution companies, which need to align with national targets.

Looking forward, the government’s emphasis on solarisation and renewable energy projects, like the Balochistan agricultural tube-well initiative, marks a significant step toward addressing energy access issues in the agricultural sector while reducing reliance on traditional grid power.

As the country’s energy sector navigates through these financial and operational hurdles, the focus remains on achieving financial sustainability, improving bill collection, and enhancing distribution efficiency to support Pakistan’s long-term energy needs.