Multi-criteria Policy Analysis of Circular Debt in Power Sector of Pakistan /

Abstract

Electrical power has emerged as the largest energy source in residential, agricultural, and industrial sectors in this century. The increase in demand for electricity is due to its useability, affordability, transmission, and digital modernization. The cost of electricity depends on the resources used for its production. As electricity is made expensive by independent power thermal electricity producers the financial side of the power sector faces setbacks in the form of circular debt. Inefficient distribution system and electrical equipment, less plant factor, electricity theft, and unjustified subsidies pushed the power sector under the chain of trillion rupees debts called circular debt. As the departmental structure is distributed in sub-departments; every preceding department became under the debt of the proceeding department. This financially aggravated situation has adversely affected the overall efficiency, productivity, and profitability of the power sector. In this research, three major criteria i.e., technical financial and governance related to circular debt are numerically evaluated based on revenue, time, and decrement in power as well as financial losses. Sensitivity analysis is also done on every major condition to boost profit in a short time for the sector. Solutions such as an increase in the use of inexpensive sources of electricity, an increase in the efficiency of generation transmission and distribution systems, and a reduction in electrical theft, line loss, receivables, and subsidies are proposed on a numerical basis. This research will be helpful in the formation of national policy and provide countermeasures for decreasing and eliminating circular debt from the power sector to make it profitable.