Power Division denies Rs224bn circular debt spike reports, terms it ‘misleading’

The Ministry of Energy (Power Division) on Monday rejected media reports claiming that the circular debt flow increased by Rs224 billion during the period from Jul-Nov 25, despite the bank refinancing agreement signed in September 2025, declaring it as “misleading, devoid of factual data linking, up-to-date data and without seeking the Power Division version”.

In a statement, the spokesperson of PD said that it is imperative to note that the circular debt stock on June 30th 2025, cannot be compared with its stock at the end of November 2025, which is only three months.

“Furthermore, the storyis totally on a wrong footing, attributing and connecting the circular debt variation with banks’ agreement, which was primarily meant for PHPL expensive debt replacement with a much cheaper loan, and that too with a five to six-year plan to repay the loan itself,” it said.

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The spokesperson was of the view that ideally, the July to November 2025 period could have been compared with the July to November 2024 period, which has created a misunderstanding.

“It is important to highlight that the said July to November 2024 increase is primarily attributable to seasonal factors that influence monthly circular debt movements and are typically reversed by the end of the fiscal year.

“It is very important to note that the circular debt flow declined in Dec 25, resulting in a net flow of less than Rs80 billion for the period from Jul-Dec 25,” it said.

The PD expects that by the close of the current fiscal year, the circular debt position will be fully contained, with no net addition to the overall stock. “This expectation is consistent with historical trends, wherein seasonal fluctuations typically normalise in the latter part of the fiscal year,” it said.

Furthermore, it emphasised that the seasonal variations in circular debt flow have no implications for consumer-end electricity tariffs and therefore do not impact end-user pricing.

“It is also pertinent to highlight that DISCOS’ inefficiencies during FY 2024-25, as compared to FY 2023- 24, were reduced by Rs193 billion. Similarly, inefficiencies during Jul-Dec 25 further declined by Rs49 billion compared to the corresponding period of Jul-Dec 24.

“These improvements underscore the government’s continued commitment to enhancing operational efficiency and maintaining financial discipline in the power sector,” it said.

The Power Division shared that a Rs1,225 billion Circular Debt Settlement Plan is to be implemented over six years, wherein existing circular debt stock shall be refinanced at favourable terms.

“To date, the first tranche of the settlement has been received. The stock shall be eliminated in the next six years along with the discontinuation of Debt Service Surcharge,” it said.