Lesco’s Circular Debt Rises To Rs. 378 Billion

The Auditor General of Pakistan has found that the Lahore Electric Supply Company failed to implement its Circular Debt Management Plan, allowing its circular debt to increase to Rs. 378.3 billion by the end of the fiscal years 2022 and 2023 despite repeated directives from its Board of Directors.

According to the performance audit covering the fiscal years 2021 and 2022 and 2022 and 2023, LESCO’s Board of Directors had instructed the management during its 235th meeting on July 15, 2021, to prepare a comprehensive plan to reduce Aggregate Technical and Commercial losses and curb the rising circular debt.

The board also directed the management to hold regular performance review meetings and present operational, technical, commercial, and financial performance reports.

However, the audit found that the management failed to comply with those directives. No performance review meetings were held to formulate policies aimed at reducing transmission losses, improving recoveries, or monitoring actions to contain the growing circular debt. The report said the board also lacked an effective oversight mechanism to ensure its decisions were implemented.

As a result, LESCO’s total circular debt increased from Rs. 307.3 billion in the fiscal years 2021 and 2022 to Rs. 378.3 billion in the fiscal year 2022 and 2023. The audit attributed the increase to higher payable invoices and rising Aggregate Technical and Commercial losses.

In its response to the audit, LESCO management said the increase in circular debt was primarily caused by transmission and distribution losses and a shortfall in bill recoveries.

It also stated that a request seeking a review of transmission and distribution losses was pending before NEPRA’s Appellate Tribunal. The auditors, however, rejected the explanation, stating that the Board of Directors had failed to ensure implementation of the Circular Debt Management Plan 2023.

The audit further noted that the Departmental Accounts Committee instructed LESCO management on February 15, 2024, to provide its annual business plan for verification within 30 days. Despite those directions, the management failed to submit the plan before the audit report was finalized.

The Auditor General recommended that LESCO make concrete efforts to fully implement the Power Division’s Circular Debt Management Plan 2023 and keep the audit authorities informed of the progress.