DESPITE government’s attempts to follow International Monetary Fund (IMF) directives, including raising power tariffs, the circular debt continues to soar. The fiscal year 2022-23 witnessed the circular debt reaching a staggering Rs2.31 trillion, an increase of Rs57 billion compared to the previous fiscal year. The main culprits are the unaddressed structural issues that plague the power sector, which ultimately burden loyal power consumers with hefty financial costs.
Circular debt in the power sector is a longstanding issue that demands immediate attention and comprehensive solutions. One of the primary causes is the inefficiency of power distribution companies. These companies suffer from high losses due to theft, technical issues and administrative shortcomings. Additionally, low bill recoveries further exacerbate their financial woes. In FY23, DISCOs recorded losses, inefficiencies and non-recoveries of bills amounting to a staggering Rs396 billion, up from Rs313 billion in FY22. Structural problems in the power sector have remained unaddressed for years. These issues include outdated infrastructure, lack of investment in transmission and distribution and a lack of competition in the energy market. One of the most critical steps is to address the inefficiencies in DISCOs. This can be achieved through structural reforms, better governance and investment in modernizing infrastructure. DISCOs should be held accountable if they fail in reducing losses and improving bill recoveries. Now unfortunately they are again demanding an increase in the power tariff by Rs 1.829/unit. It is imperative to understand that further increasing power tariff is not a sustainable solution to the circular debt crisis.
The common man is already burdened with high electricity costs which impact their daily lives and the overall cost of living. Instead of transferring the financial burden onto consumers, the focus should be on structural reforms and improving the efficiency of the power sector. The ongoing campaign against power pilferage has produced some good results but this must be sustained and taken forward without any discrimination. And time has come that we diversify our energy sources including renewable energy such as solar and wind power. This will not only reduce reliance on expensive fossil fuels but also contribute to environmental sustainability.
