By SKM
June13, 2025
ISLAMABAD: The much-touted Debt Service Surcharge (DSS) of Rs3.23 per unit is already in place and electricity consumers are already paying it through the electricity bills, so there will be no new burden on consumers. However, the consumers under the latest scenario will continue to pay it for the next 6 years to offload the loan of Rs1275 billion with interest the state-owned Central Power Purchase Agency (CPPA) has acquired from 18 commercial banks to erase the circular debt in power sector once for all, a senior official of Power Division who also remained part of the discussion with the banks for loan.
He said the surcharge of Rs3.23 per unit is not the new one as it is already in place but it will now last for 6 years to pay the loan. He said that the term sheet has been finalized between banks and CPPA and the summary to this effect has been sent to the Federal Cabinet for approval which may meet soon after the arrival of Prime Minister Mian Shehbaz Sharif from UAE.
To a question, he said that the surcharge of Rs3.23 per unit has already reached the 10 percent cap and the government does not intend to increase its cap. However, on the insistence of the IMF, the 10 percent cap has been removed as it was a structural benchmark.
“This initiative of getting a loan of Rs1275 billion with its terms and conditions from 18 commercial banks will be enforced either in the third week or fourth week of the current month of June. The Circular debt of the Power Sector currently stands not more than Rs2.381 trillion. The said circular will be reduced by Rs1275 billion through the loan and the remaining debt will be reduced because of the impact of the reduction in the discount rate, and gains through revised power purchase agreements with IPPs and terminating of contracts with 6 IPPs. In the end, Rs300 billion would be left as part of circular debt which would be wiped out through efficient gains.”
“Under the term sheet, the commercial banks would provide a fresh loan of Rs617 billion at 10.50-11 percent mark-up rate based on KIBOR-0.90 basis point which will be paid in 6 years’ time by electricity consumers through Debt Service Surgery (DSS). “The consumers will pay Rs3.23 per unit in the bills as DSS. The commercial banks would detect the DSS amount at source at the time of paying the electricity bills by consumers. At source deduction on paying bills will improve the risk profile of the banks.”
“The commercial banks (CBs) are providing the loan of Rs617 billion to CPPA this time as IMF has allowed the banks to extend the credit lines to the said state-owned entity.” The CBs will provide the loan of Rs617 billion for lending purpose with no government guarantee as the CPPA has a reasonable number of receivables.
The Commercial Banks earlier provided the power sector loan of Rs658 billion to the government which is parked in PHL (Power Holding Limited) PHL for a purpose of investment with a government sovereign guarantee. If the fresh loan of Rs617 billion is added, then total loan will hike to Rs1275 billion. Ends
