ISLAMABAD: The National Electric Power Regulatory Authority (NEPRA), the country’s power sector regulator, has been found involved in serious financial mismanagement and governance lapses, raising critical questions about its transparency, accountability, and regulatory effectiveness, according to an audit report.
According to audit report 2025-26 of year 2024-25 despite posting record financial gains, NEPRA violated its own governing law by failing to transfer the full surplus to the Federal Consolidated Fund (FCF). Against a total comprehensive income of Rs1.58 billion for FY2024-25, the Authority remitted only Rs921.99 million, while retaining nearly Rs884 million in clear breach of statutory requirements.
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The audit termed this retention a direct violation of Section 17 of the Nepra Act, 1997, which mandates that all surplus funds, after tax, must be promptly transferred to the federal kitty. Instead, Nepra allowed public funds to accumulate on its balance sheet, with payable amounts swelling alarmingly from Rs221.99 million to Rs883.91 million within a single year.
The report highlights weak financial discipline, noting that Nepra prioritised internal expenditures over its legal obligation to remit funds to the government—raising concerns of misplaced priorities and inadequate oversight.
In another major irregularity, Nepra deviated from its approved accounting policies. While its framework requires revenue recognition on an accrual basis, the audit found that revenue was recorded on a cash basis, resulting in an understatement of income by Rs91.34 million. This misreporting undermines the credibility of the regulator’s financial statements.
The audit also exposes ineffective enforcement, revealing that Nepra failed to recover Rs161.94 million in outstanding dues from licensees. Despite being fully provisioned as doubtful debt, the amount has remained unresolved for years without write-off or meaningful regulatory action, reflecting weak follow-up and enforcement failure.
Adding to the concerns, advances extended to employees surged by over 51 percent in five years to nearly Rs984 million. This increase came at a time when liabilities towards the federal government were mounting, indicating poor financial planning and questionable spending priorities.
Although Nepra’s financial indicators show significant improvement—surplus ratio rising from 21.92 percent in FY2020-21 to 25.97 percent in FY2024-25, and return on assets (ROA) increasing from 18.25 percent to 42.81 percent—these gains are overshadowed by governance weaknesses.
Return on capital employed (ROCE) surged from 51.42 percent to 217.15 percent, while return on equity (ROE) climbed from 37.73 percent to 135.88 percent, reflecting strong surplus generation. However, the audit notes that such financial growth has not translated into improved compliance or institutional discipline.
During FY2024-25, surplus before tax jumped by 93.5 percent to Rs2.52 billion, driven by a 40.3 percent increase in total income, while administrative expenses grew by 16.6 percent. Surplus after tax stood at Rs1.54 billion. Despite this, Nepra failed to ensure full and timely remittance of funds as required under the law.
The report also criticises NEPRA’s cash management practices, noting that significant portions of surplus remain tied up in tax obligations and advance tax adjustments, delaying transfers to the government and complicating financial transparency.
Overall, the audit paints a troubling picture of an institution that, despite its pivotal role in regulating Pakistan’s power sector, is grappling with weak internal controls, poor compliance, and ineffective enforcement mechanisms.
The audit has recommended strict corrective measures, warning that continued lapses could erode public trust and undermine the credibility of the country’s power sector regulator.
Copyright Business Recorder, 2026
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