“The circular debt is still a major

issue confronting the power sector. Receivables of the distribution sector increased by more than Rs120 billion during 2014-15, of which increase of Rs75 billion was due to the private sector.”

–NEPRA – 2015

In the wake of 2017, Pakistan faces a number of critical issues ranging from internal civil unrest to external isolation challenges aggravated by Modi Government across the border. In a broader view, these problems may seem as the only ones which sound threatening, and undoubtedly are. However, apart from the war on terror, Imran Khan and Panama leaks, Pakistan faces monstrous problems which have led to an instable economy and a miserable outlook for what is lawfully called ‘good governance.’ People running public offices are more concerned about fixing what is apparent, while the roots of the economy are decayed and rotten. The fundamentals of a progressive entity, which is Pakistan itself here, are smooth running of its cash flows. However, the problem of circular debt, most prevalent in the energy sector, has created a hindrance to progress. Economic Coordination Committee (ECC) of the Cabinet defined circular debt in 2014 as the amount of cash shortfall within the Central Power Purchasing Agency (CPPA), which it cannot pay to power supply companies. Now this overdue amount is due to a number of factors. National Electric Power Regulatory Authority (NEPRA) calculates this as the difference between the actual cost and the tariff which is the distribution company’s loss over and collections under that allowed by NEPRA. Secondly, it could be the delayed or non-payment of subsidies by government. Thirdly, it could be the delayed determination and notification of tariffs.