Page 86 - CMA Journal (Mar-Apr 2025)

Articles Section

Circular debt grows as DISCOs experience continuous promising solutions. Time-of-use pricing, smart meters,
financial losses. Subsidies are distributed in a flawed and peak demand strategies have shown global success in
manner. High-consuming commercial and industrial optimizing grid performance. Vietnam’s solar deployment
users often receive more benefits than the poor. Poor and decentralized power systems offer relevant examples
budgetary resource allocation increases the budget for Pakistan. However, governance issues in Pakistan act as
deficit and offers minimal aid to vulnerable population a barrier to adopting these solutions. Researchers have yet
groups. Civil servant involvement in energy to develop models that connect reform policy standards
management creates one of the main factors sustaining with institutional practices.
this crisis. The process of tariff decisions has shifted away
from economic analysis because political entities delay Research Significance and Policy Implications
implementation. Political interference reduces funding This study offers a distinctive contribution through its
for renewable energy projects. A cycle of operational holistic and integrative analysis of Pakistan's circular debt
inefficiency leads to insufficient investment and unstable crisis, going beyond conventional analytical frameworks.
financial conditions, thus perpetuating the circular debt Unlike traditional research that isolates financial
problem (OECD, 2022; IEA, 2020). structures or technical issues, this work synthesizes four
key dimensions: financial modeling, regulatory
What Can Pakistan Learn from Global Examples?
assessment, institutional dynamics, and energy sector
The problems of circular debt and inefficiencies are not planning. This interdisciplinary approach enables a more
unique to Pakistan. Many developing economies across comprehensive understanding of the circular debt
Sub-Saharan Africa and South Asia face similar fiscal and phenomenon across the energy value chain.
operational difficulties. These regions confront dual
A critical insight from the study is the necessity of
challenges of price-cost mismatches and operational
aligning policy reforms with robust institutional
inefficiencies. Several countries have implemented
accountability. Findings indicate that distribution
strong solutions. In 2015, India launched the Ujwal
companies (DISCOs) require performance-based
DISCOM Assurance Yojana (UDAY) to enhance DISCO
accountability systems, where financial support or
fiscal stability. UDAY allowed states to absorb DISCO debt
license renewals are contingent on achieving specific
in return for performance reforms. Through digitization,
service delivery benchmarks—such as reductions in line
transparency, and operational restructuring, the program
losses, improvements in bill recovery, and enhanced
reduced technical and commercial losses.
customer satisfaction. The absence of such mechanisms
Vietnam showcases strategic planning with clean energy perpetuates inefficiency and complacency within
goals. The Vietnamese government enabled foreign state-owned utilities.
investment through a business-friendly regulatory
Urgent reforms are also required in Pakistan’s subsidy
framework. Tariff reforms encouraged joint ventures, and
policies, which currently employ weak targeting
solar and wind energy saw rapid growth. This strategy
mechanisms, drain public finances, and inadvertently
reduced dependence on fossil fuels (OECD, 2021).
favor wealthier consumers. The study advocates for an
Political will, regulatory autonomy, and stakeholder
electronic verification system to ensure subsidies reach
engagement helped India and Vietnam overcome
only low-income households while phasing out
structural defects. Their experiences highlight the
untargeted subsidies. This shift promotes both fiscal
importance of aligning energy policy with market needs
efficiency and social equity.
and encouraging private sector involvement. These
global examples offer Pakistan lessons in implementing Electricity tariffs must also be rationalized to reflect the
data-backed reforms, accountability instruments, and true cost of power generation and distribution. However,
innovative solutions. such reforms should be accompanied by social safety
nets to shield vulnerable consumers. The adoption of
Structural Gaps in Pakistan’s Energy Governance lifeline tariffs, time-of-use pricing structures, and smart
Pakistan's energy governance faces three major metering can help consumers manage their energy use
challenges: fragmented reforms, political restrictions, and without compromising affordability.
institutional inertia. Distribution companies show Furthermore, public education and consumer
insufficient responsibility and low motivation to reduce engagement emerge as critical enablers of reform.
losses (Tauhidi & Chohan, 2020). The absence of Citizens should be well-informed about system
cost-recovery pricing leads to larger subsidies and inefficiencies and empowered to participate in demand
growing financial debt. International agencies like the management programs. Awareness campaigns,
World Bank and IMF demand reforms, but Pakistan has participatory regulatory platforms, and policy dialogues
made limited progress. Demand-side management (DSM) with civil society will promote transparency and
strategies and renewable energy integration are strengthen accountability in the energy sector.

84 ICMA’s Chartered Management Accountant, Mar-Apr 2025