By SKM
August05, 2025
ISLAMABAD: The signing between CPPA-G (Central Power Purchase Agency) and 18 commercial banks for the Rs1275 billion loan to be utilized to reduce the circular debt to Rs339 billion is likely to be signed on August 12, 2025 and then the amount will be transferred into the account of CPPA.
This amount will be utilized immediately to offload the loans of Rs683 billion parked in Power Holding Company Limited (PHL) and the remaining stock of interest bearing arrears amounting to Rs569 billion to the government power plants (GPPs) including nuclear power plants and CPEC projects will be paid and the circular debt will be squeezed to Rs339 billion, a senior official of the power division told this scribe.
“All the required prerequisites will be finalized with the commercial banks by next week for Rs1275 billion loan and most likely the signing ceremony will be held between CPPA-G and commercial banks on August 12, 2025.”
The power sector circular debt from Rs2.381 trillion has already tumbled to Rs1.614 trillion after the successful negotiations of the Task Force on Power Sector with more than 35 IPPs and termination of 6 contracts. The task force’s endeavors, to this effect, have resulted in saving of Rs3600 billion in the remaining period of the contracts. More importantly, the IMF has been told that the Task Force on Power Sector comprising Adviser to PM on privatization Mr Muhammad Ali, Lt General Zafar Iqbal, and official experts from SECP, CPPA-G and NEPRA which through negotiations with IPPs, got cleared arrears of Rs348 billion (Rs127 billion through budgeted subsidy and Rs221 billion paid by CPPA).”
The Task Force, however, in a big deal, has already managed to get Late Payment Interests (LPIs) of IPPs amounting to Rs387 billion waived off. The amount of Rs254 billion has been cleared through an additional budgeted subsidy for circular Debt clearance.
After payments of Rs1275 billion by CPPA, the circular debt will be reduced to Rs339 billion. This remaining stock of Rs339 billion will be dealt with through reforms and the efficiency of DISCOs.
The electricity consumers will retire the loan of Rs1275 billion through Debt Service Surcharge (DSS) of Rs3.23 per unit that 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.
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.
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. Ends
