Telecom and banking success shows identity linking can fix utility recoveries
KARACHI: Pakistan’s energy sector has long functioned under the persistent shadow of circular debt. Around the start of the fiscal year, the amount stood at nearly Rs1.7 trillion for the power sector and Rs2.6 trillion for gas, with subsequent data indicating that the figure would only climb further. Recoveries may or may not have improved, but even a minor shortfall results in losses amounting to billions. This is a deeply entrenched structural issue that strains government finances, inevitably leading to bailouts and higher tariffs for those consumers who do pay.
There are additional consequences as well. When one entity within the energy supply chain fails to make payments, the burden moves upstream—from distribution companies to generators and fuel suppliers. Although multiple factors contribute to this cycle, including delayed subsidies, capacity payments, and transmission losses, the result invariably hurts economic growth. At this stage, any effort to boost economic activity encounters obstacles.
The power sector bears the larger impact, as DISCOs—the entities responsible for collections—often appear to operate like headless chickens trying to meet their recovery targets. However, non-payment stems from weak enforcement mechanisms, incomplete or outdated consumer records, illegal connections and identity masking, as well as the absence of a verifiable link between consumption and a legally accountable individual.
Yet solutions do exist. The introduction of mandatory biometric registration for all utility customers—linking electricity and gas connections to a verified individual identity rather than to a property—could offer a comprehensive solution to the recovery problem.
Biometric systems help prevent fraud by enabling precise tracking for improved collections. Through streamlined verification, utilities would gain reliable data to pursue recoveries, thereby reducing commercial losses and the buildup of circular debt. The telecom sector has achieved notable success with this approach, as has the banking sector, where data is linked to other forms of deterrence.
Beyond recoveries, biometric registration allows the government to move toward targeted subsidies, increase the effectiveness of legal recourse, and enhance dispute resolution.
What is encouraging is the government’s acknowledgment of this process and its initiation in IESCO’s territory, where biometric verification is now mandatory for new electricity connections and reconnections. Although primarily intended for onboarding, this builds accurate consumer data to improve billing and recovery across utilities. With the opening of power markets, it becomes even more critical to link responsibility to individuals who can be held accountable.
However, this pilot needs to be expanded to the national level. Recognizing a premises as a customer provides a blanket of anonymity that makes enforceability difficult. Switching ownership from a property to a person would demonstrate significant improvements in recovery at a global level.
Nigeria is using biometric registration of electricity consumers as part of its distribution reforms. This has been used to clean up customer databases and improve billing accuracy, particularly in urban centers with high theft rates. Similarly, South Africa has utilized biometric verification to roll out prepaid metering systems—a key mechanism for reducing defaults, especially in areas where affordability is an issue.
The lessons are evident. In areas where consumer identity is clearly established and verifiable, utility performance improves—particularly in billing and recovery.
Crucially, the initiative must be framed not solely as an enforcement tool but as a fairness mechanism ensuring that each consumer pays for their own usage, rather than for systemic inefficiencies or the defaults of others.
However, biometric registration can only do so much in playing its part to reduce circular debt. Pakistan’s repeated experience with circular debt, where temporary financial restructurings have failed to achieve their intended impact, underscores the need for long-term structural interventions. In a system where trillions of rupees remain locked in receivables, the question is no longer whether reform is needed, but rather that it is unavoidable.
Biometric registration offers a pathway toward a more accountable, transparent, and financially sustainable utility sector—one where the burden is more equitably shared, and the cycle of circular debt can finally begin to be broken.