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 rise to Rs. 378.3 billion by the end of FY2022-23 despite repeated directions from its Board of Directors.

According to a performance audit covering FY2021-22 and FY2022-23, the Lesco board had directed the management during its 235th meeting on July 15, 2021, to prepare a comprehensive plan for reducing aggregate technical and commercial losses and controlling the rising circular debt.

The board had also asked the management to hold regular performance review meetings and submit operational, technical, commercial and financial performance reports.

However, the audit found that these directions were not implemented. It said no performance review meetings were held to frame policies aimed at reducing transmission losses, improving recoveries or monitoring steps to contain circular debt. The report added that the board also lacked an effective oversight mechanism to ensure execution of its decisions.

As a result, Lesco’s circular debt increased from Rs. 307.3 billion in FY2021-22 to Rs. 378.3 billion in FY2022-23. The audit attributed the increase to higher payable invoices and rising aggregate technical and commercial losses.

In its response, Lesco management said the increase in circular debt was mainly caused by transmission and distribution losses and a shortfall in bill recoveries.

It also said a request for review of transmission and distribution losses was pending before Nepra’s Appellate Tribunal. The auditors, however, rejected the explanation, saying 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 had directed Lesco management on February 15, 2024, to provide its annual business plan for verification within 30 days, but the document was not submitted before the audit report was finalised.

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