The federal Power Division has attributed a 61 billion rupee increase in power sector circular debt directly to budget deductions implemented by the Ministry of Finance. Official figures reveal that total circular debt stock expanded to 1.675 trillion rupees by June 30 of this year, up from 1.614 trillion rupees recorded at the close of the previous fiscal year. In a detailed statement explaining the financial numbers, the Power Division highlighted that an unexpected deduction of 98 billion rupees from its budgetary allocation disrupted projected debt reduction targets for the 2025-26 fiscal year.
According to the Power Division, the end-year financial report detailing these figures remains subject to final regulatory and statutory approvals before official publication. The stated total stock of 1.675 trillion rupees reflects accumulated liabilities across the national power grid, excluding obligations associated with K-Electric. The central government remains bound by strict commitments under its active International Monetary Fund program, which mandates zero net accumulation in circular debt flows along with a steady reduction of the existing debt stock. Previous milestone performance benchmarks set under the IMF framework, including the end-December 2025 targets, were successfully satisfied and formally acknowledged by international monitoring teams.
Elaborating on the funding mechanics, the Power Division noted that a total sum of 893 billion rupees was originally allocated for the power sector within the federal budget for fiscal year 2026. However, subsequent fiscal adjustments led to a direct deduction of 98 billion rupees from the promised funds. Officials maintained that if the power sector had received its complete budgetary settlement as planned, circular debt would have continued its downward trajectory, dropping to an estimated 1.577 trillion rupees by the conclusion of the fiscal year instead of rising.
A examination of parliamentary budget records indicates a broader sequence of fiscal retrenchments affecting power subsidies. Initial budget documents presented to parliament originally earmarked 1.036 trillion rupees for power sector subsidies. That sum was subsequently revised down to 893 billion rupees around the time the fiscal year 2027 budget was formally introduced. The statement issued by the Power Division further clarified that an additional 98 billion rupee spending cut was imposed under general austerity measures before the current year budget received final legislative approval, bringing effective power subsidy disbursements down to approximately 795 billion rupees.
Despite the setback in circular debt flow figures caused by subsidy shortfalls, the Power Division emphasized that structural and operational parameters within power distribution companies continue to show substantial improvement. Historical data shows that circular debt had previously experienced a major reduction, falling from 2.393 trillion rupees in fiscal year 2024 to 1.614 trillion rupees in fiscal year 2025. This broader decline was driven in large part by aggressive operational overhauls implemented across state-owned power distribution companies.
System losses across distribution companies stood at 591 billion rupees during fiscal year 2024 before dropping by 193 billion rupees to reach 397 billion rupees in fiscal year 2025. Over the course of the most recent fiscal period, the Power Division achieved a further reduction in distribution losses, bringing the figure down from 397 billion rupees to 326 billion rupees. Over a comprehensive two-year evaluation period, aggregate distribution system losses have been curtailed by 265 billion rupees, marking a drop from 591 billion rupees to 326 billion rupees.
The Power Division maintained that these operational performance gains demonstrate the tangible success of ongoing administrative and technical reforms across the power grid. Authorities asserted that the temporary uptick in circular debt stock stems entirely from external fiscal deductions managed by the Ministry of Finance rather than any deterioration in utility operations or billing collections. Moving forward, energy management authorities reaffirmed their commitment to implementing structural reforms designed to restore long-term financial viability and service reliability across the national power sector.
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