Why your electricity bill keeps rising while power is stolen down the street — and how a trillion-rupee "black hole" quietly forms in the energy sector.
Almost every household in Pakistan has felt it: bills that climb faster than the electricity they use, and load-shedding that still arrives in the heat of summer. Behind both lies a single, tangled problem the experts call circular debt — a chain of unpaid bills that loops through the whole power system. It is fed by genuine policy mistakes, but also by something more straightforward: electricity that is generated, delivered, and then never paid for, because it is stolen or written off as "loss." Honest paying customers end up covering the gap.
Circular debt is simply unpaid money that goes around in a circle and never gets cleared. Picture the chain of who owes whom in the power sector:
If consumers don't pay (or steal power), the distribution companies can't pay the central buyer; the central buyer can't fully pay the power producers; producers struggle to buy fuel; and the government steps in with borrowed money and surcharges. The "debt" is the growing pile of unpaid obligations stuck in that loop.
Not all of circular debt is corruption — a large part comes from policy choices like guaranteed "capacity payments" to power plants. But several major leaks are squarely about theft and weak governance, and they are the parts citizens can see on their own streets.
| Leak | What it is | Who pays in the end |
|---|---|---|
| Kunda | Illegal hooks thrown over power lines to draw electricity without a meter or bill | Honest neighbours, via higher tariffs |
| "Line losses" | Power lost in the system — partly technical, partly theft disguised as loss | All paying consumers |
| Under-recovery | Bills issued but never collected, including from some government departments | The national budget & borrowing |
| Capacity payments | Fixed payments owed to power plants even when their electricity isn't used (a contract issue, not theft) | Consumers & taxpayers |
| Meter tampering | Meters slowed, bypassed, or "managed" with insider help | Everyone billed honestly |
Stolen electricity is never really free. The bill simply travels — and lands on the people who pay honestly.
This is the part that feels unfair, because it is. When a chunk of electricity is stolen or unpaid in an area, the distribution company still has to cover its costs. Rather than absorb the loss, the gap is recovered from the consumers who do pay — through higher tariffs and surcharges set across the system. So the more theft a network tolerates, the more its honest customers are charged. Theft and weak collection are, in effect, a hidden surcharge on integrity.
To stop the loop from collapsing the sector, the government periodically borrows enormous sums from banks to pay down the debt. In 2025 the government arranged Rs 1,275 billion from a syndicate of eighteen commercial banks — to be repaid over six years through the Rs 3.23-per-unit Debt Service Surcharge already sitting on electricity bills, as The News reported that June. In other words, today's consumers are now paying interest on yesterday's unpaid and stolen power. The stock did fall year on year, from Rs 2.53 trillion in February 2025 to Rs 1.84 trillion in February 2026; but over the same stretch the Power Division's own figures show it building back up by Rs 224 billion from its June 2025 level, which is what happens when the underlying leaks aren't sealed.
Circular debt is not an abstract accounting term. It drives the load-shedding that shuts down shops and factories, the fuel shortages at power plants, and the relentless tariff hikes that hit the poorest households hardest — in the poorest fifth of households, PIDE research by Rubina Ilyas published in 2025 found, close to 37 per cent of the bill is made up of surcharges tied to this debt. A problem created partly by theft and mismanagement is paid for, disproportionately, by people who had no part in either.
The circular-debt crisis can feel too big and too technical for any individual to affect. But its foundation is ordinary: power taken without paying, and bills no one collects. Sealing those everyday leaks is where the trillion-rupee problem actually begins to shrink.