The case describes how a very large intra-corporate debt was built up in Pakistan, among the private and public sector energy and power generation companies that were some of the country’s largest organizations. An unexpected slowdown in recovery of bills created a debt that affected corporate business operations, and the Pakistani economy as a whole. The energy and power sectors are discussed, as are the reasons for this circular debt. The Pakistani government was heavily involved in regulating the energy and power sectors; in 2008, to respond to high oil prices a subsidy was provided to keep the price of diesel low. The government, however, had not created an effective plan to recover these funds, and when large public sector enterprises (PSEs) such as Pakistan International Airlines (PIA) did not pay their bills, no action was taken. The focus of this case is on resolving the very large amounts of debt that had accumulated in various energy companies. A secondary analysis can explore the impact of regulation on the operations of oil companies.
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