PM releases funds amounting to Rs21.44b, remaining to be paid by October. PHOTO: FILE
ISLAMABAD:
The Finance Division has refused to allocate funds under the Public Sector Development Programme (PSDP) in the ongoing fiscal year for reduction in loans of the power sector.
During discussions in a recent meeting of the Economic Coordination Committee (ECC), the Power Division highlighted the background of the proposal. It told the forum that for loan adjustments, the authorisation of the Ministry of Planning was required.
It said that PSDP allocation, in particular, was needed to reduce the loan portion, adding that it should be a non-cash adjustment.
The Finance Division cited the limited fiscal space available in the current PSDP and suggested that the Power Division should re-submit the proposal in consultation with the Economic Affairs Division and the Ministry of Planning.
The ECC underscored the need for discussing matters related to power and petroleum divisions in the Cabinet Committee on Energy for their better resolution.
It was noted that the Pakistan Atomic Energy Commission (PAEC) and government-owned power plants (GPPs) had agreed to waive, abandon and relinquish all rights and claims of late payment interest as of December 31, 2024 under the late payment rationalisation and potential tariff reduction deal.
Sources told The Express Tribune that the Task Force on Implementing Structural Reforms in the Power Sector had conducted a detailed analysis of potential tariff reduction for nuclear power plants (NPPs) to provide benefit for consumers. The task force, after various rounds of discussions, finalised the Memoranda of Understanding (MoUs) with NPPs to rationalise tariffs.
According to the salient features, power purchasers will pay the outstanding balance as on December 31, 2024, amounting to Rs340.9 billion. PAEC agreed to waive, abandon and relinquish all rights and claims of late payment interest as of December 31, 2024. From January 1, 2025, the delayed payment rate will be three-month Kibor plus 1%.
Additionally, the task force negotiated the waiver of late payment interest with three GPPs, namely Haveli Bahadur Shah plant, Balloki plant and Quaid-e-Azam thermal power plant until December 31, 2024. They agreed to waive, abandon and relinquish rights and claims with respect to the late payment interest. These provisions were tabled before the ECC, which gave its approval.
The ECC was informed that Rs614.92 billion had been disbursed to GPPs, including the nuclear power plants. As of July 31, 2025, the outstanding liabilities payable to GPPs stood at Rs140 billion. It was highlighted that subsequent payments to GPPs would be made out of funds available under the circular debt financing facility.
The Central Power Purchasing Agency-Guarantee (CPPA-G) was authorised to utilise part of proceeds from the circular debt financing facility to retire the outstanding debt obligations of Power Holding Limited (PHL) amounting to Rs683.253 billion.
The ECC was informed that the task force had negotiated the waiver of late payment interest with three GPPs – Haveli Bahadur Shah, Balloki and Quaid-e-Azam thermal power plants – until December 31, 2024.
Consequently, Clause (i) of the cabinet’s decision dated March 19, 2025 regarding the waiver of late payment interest would be revised to reflect an updated amount of Rs116.83 billion in place of the previously stated amount of Rs87.58 billion.
The ECC was requested to approve the MoUs reached with commercial banks and authorise CPPA-G to execute the negotiated settlement agreements based on the MoUs. It was asked to allow CPPA-G and PAEC to amend the respective agreements and make legal changes, if required, to standardise such amendments.
Approval was also sought for taking facilitation measures for the nuclear power plants. The ECC was urged to authorise PAEC to file necessary petitions with the National Electric Power Regulatory Authority (Nepra) based on the agreed adjustments.
The ministry also sought the go-ahead to authorise CPPA-G to settle the outstanding liabilities of GPPs from funds available in the circular debt financing facility. Amendments to the cabinet’s decision taken on June 16, 2025 were proposed for PHL loan repayment amounting to Rs23.607 billion and approval was sought for waiving the late payment interest (LPI) of Rs114.153 billion, which CPPA-G owed to three GPPs.
The ECC of the cabinet considered a summary titled “Rationalisation of LPI and Potential Tariff Reduction for Nuclear Power Plants” and approved the proposal. It directed that, for better coordination and alignment of matters related to power and petroleum sectors, such issues be submitted to the Cabinet Committee on Energy for strategic decision-making across the energy sector.