Circular debt in Pakistan’s energy sector – both power and gas – is largely attempted to be addressed as a pricing issue, subsidy problem, or a governance shortcoming. But it is really all three, masked by a basic structural flaw that has not yet received any attention but deserves it; utilities in Pakistan are designed to serve premises, not people. The pricing issue was one of the International Monetary Fund’s (IMF) initial arguments when Pakistan approached the lender for its previous bailout. The lender has also told Islamabad to solve the second issue by going for targeted subsidies rather than blanket exemptions. The less said about governance, the better. But despite international agencies’ close eye on Pakistan’s sectoral issues, circular debt in the latest uploaded report conveys a sorry tale. The stock of circular debt has increased by Rs79 billion in just three months of FY26, compared to an increase of Rs77 billion in the same three-month period of the previous fiscal year. It’s a bit of a sorry state of affairs that this is the latest data made publicly available as we are now sitting in the final quarter of the fiscal year. But this argument for another day. Back to the basic structural flaw where utilities include gas and power both serve premises, and not customers. This technical distinction has had severe consequences. An unpaid bill – reflected in under-recoveries of Rs84 billion in the July-September period of FY26 – the utility cannot go after the customer that had the liability. It, instead, has to be after the location or premises where the connection has been installed. Holding this premises accountable means the liability is transferred to the next holder of this location. The system has no way to hold targeted accountability. Stayorders are common and relaxation is often accommodated. This incurs additional costs including litigation and diversion of resources. These amounts are not comparable to any other sector or entity where defaults happen. Banking would come close, but if one were to understand their accountability procedure, there would be nothing but sympathies for the energy sector. Hence, at its core, there is a problem of identity and traceability. A compelling solution to this would be mandatory biometric registration of all utility customers, linking each electricity and gas connection to a verified individual through NADRA. In this day and age, one has their bank accounts, cellphone numbers, vehicles, and even properties biometrically verified through NADRA. Why should not the gas and electricity connection be linked? This fundamentally transforms the accountability framework. Instead of chasing unpaid bills tied to a physical location, utilities would have a direct, enforceable relationship with a person. This makes it easier to track, penalise, and more importantly, deter defaults. For context, in FY25, under-recoveries of just 3. 38% of overall billed amount stood at a massive shortfall of Rs132. 5 billion. This is how serious just one percentage point of non-recovered amount means for Pakistan. The case becomes stronger if one were to look at the implications. Defaults now would carry consequences beyond mere disconnections. Imagine restrictions on obtaining new connections or flags within broader financial systems. Bill settlement will now be a priority. A behavioural change that goes beyond mere tariff adjustment is the need of the hour. Additionally, biometric linkage of utilities’ connections would improve subsidy targeting. Pakistan’s current approach relies on consumption thresholds as a proxy for household income. This is inefficient and prone to leakage. By tying usage to verified individuals, the government would be able to align subsidies more closely with actual socioeconomic profiles. This reform also offers spillover benefits through financial transparency. Utility payment histories, when linked through NADRA, could feed into credit profiling systems, supporting lending decisions and encouraging financial inclusion. There are broader governance gains as well. Pakistan has struggled with undocumented tenancies and informal occupancies, which are both administrative and security risks. This biometric utility registry would create a flow that would stay updated without the need for bureaucratic hurdles. Yes, there are concerns around implementation complexity, privacy, and cost. But these are all addressable. Pakistan has a robust biometric infrastructure in place that has evolved and been refined over the past decade. Successful integration has already demonstrated feasibility and scalability. Leveraging existing infrastructure reduces cost and implementation complexity. As far as privacy concerns go, clear legal frameworks, governance around data usage and protection will be essential. Pakistan’s energy sector does not suffer from a lack of ideas. There are enough experts and policy ideas. It suffers from a lack of will and diffused responsibility. There is a need to replace anonymity with accountability. Circular debt is discussed in billions. But its roots lie in the millions of individuals who decide not to pay, and not to change. Its time to change this. The time is now. Any system that is more costly not to implement than to implement must be done at the earliest.
Making biometric registration mandatory for energy utilities
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