Impact of Local Vs Imported Coal on Circular Debt: Case of Pakistan Power Sector

Abstract

The importance of the power sector in the country's economic prosperity has always been accepted as a universal truth. The globe has recognized the importance of the electricity sector for any country and regards it as the backbone of the economic structure. This project report examines the differences in electricity generation from domestic and imported coal, as well as the influence on circular debt. The article explains Pakistan's electricity sector before delving into why local coal is more significant than imported coal and how it affects circular debt. Circular debt must be handled to alleviate supply restrictions. However, given that the outstanding stock of circular debt must be paid off, the process is challenging. It has had a long-term negative influence on the sustainability of Pakistan's overall electricity system, in addition to producing financial concerns. According to the report, a number of factors contribute to this financial liability, including governance issues, operational and commercial inefficiencies in the system, a lack of efficient planning and bad policies in the generation, transmission, and distribution sectors, distortions in energy pricing strategy, and, most importantly, the use of imported coal rather than local coal. The purpose of this research is to uncover the fundamental causes of existing circular debt and the steps that must be taken to not only pay off the debt but also keep the reform process moving forward. The research also suggested a number of mitigation strategies to address the issue of circular debt in Pakistan's power sector, including but not limited to the use of local coal. The study is founded on evidence/data gathered from numerous studies, research projects, and other sources.