ISLAMABAD: The industrial sector is facing a mounting crisis as circular debt in the power system continues to rise, with temporary fiscal bailouts masking deep structural inefficiencies, the Federation of Pakistan Chambers of Commerce & Industry (FPCCI) has warned.
The FPCCI’s latest research shows that net circular debt increased by Rs75 billion between July and December 2025, only marginally lower than the Rs79 billion surge recorded in the preceding quarter. While the government injected Rs224 billion from fiscal space to contain the growth, the report cautions that such interventions merely paper over the underlying financial weaknesses without addressing long-term structural reform.
“Without these injections, circular debt would have skyrocketed, confirming that the system remains operationally cash-negative,” the FPCCI noted, stressing that imposing additional recovery surcharges on fully paying industrial consumers — already burdened with Rs131 billion in cross-subsidies — is unjustified.
The report highlights a range of structural challenges. Declines in payables to power producers primarily reflect timing differences and accounting reclassifications rather than genuine improvements. A key adjustment reclassified liabilities from ‘Amount parked in PHL’ to ‘CD Financing’, altering presentation without reducing actual obligations. Meanwhile, Disco losses remain high, and K-Electric’s non-payment ballooned to Rs229 billion, adding further stress.
The FPCCI warns that the apparent moderation in circular debt growth is largely illusory, dependent on government handouts rather than real efficiency gains. The report urges urgent policy action to reduce industrial energy costs, improve tariff efficiency, and prevent Pakistan’s industries from being rendered uncompetitive compared to regional rivals like India, Bangladesh and Vietnam.
The FPCCI stressed that the industrial sector cannot continue subsidising systemic inefficiencies and that reliance on budgetary interventions alone is unsustainable. The research, presented in a forward-looking manner, is intended to inform evidence-based policy decisions and push for structural reforms in Pakistan’s energy and industrial sectors.
