Customers of K-Electric paid a heavy price for systemic inefficiencies in Pakistan’s power sector. The utility collected and remitted Rs35.76 billion under the Debt Service Surcharge (DSS) to the Government of Pakistan through the Central Power Purchasing Agency (CPPA-G), even though KE itself does not contribute to the sector’s circular debt as it is a private entity.
The Rs3.23 per unit DSS, now embedded in electricity bills, is effectively transferring the burden of decades-long mismanagement in state-run distribution companies to ordinary households. Analysts say it is likely the third-largest standalone component of consumer tariffs, after the Cost of Power Purchase (CPP) and the Energy Purchase Price (EPP).
During FY 2024–25, the bulk of the circular debt originated from inefficiencies in state-owned DISCOs, particularly high transmission and distribution losses and low recovery ratios, which added roughly Rs265 billion and Rs132 billion, respectively. Yet, despite these gaps, the overall circular debt shrank compared to the previous year, largely due to commercial financing secured by the government to retire Power Holding (Pvt.) Limited (PHPL) liabilities and clear arrears owed to independent power producers.
Experts warn that while such financing temporarily eases the debt figures, it does nothing to fix structural flaws driving the crisis. Industries in Karachi have also repeatedly protested against the DSS, arguing that Karachi’s customers do not add to circular debt, but still have to foot the bill of the federal government.
