ISLAMABAD: The government’s plan to settle Rs1,257 billion in circular debt has run into trouble. Chinese Independent Power Producers (IPPs) have refused to waive Late Payment Surcharges (LPS), creating a key hurdle ahead of Prime Minister Shehbaz Sharif’s visit to China.
The settlement plan involves a deal with commercial banks, but it still lacks approval from the International Monetary Fund (IMF). Officials confirmed that both the Development Finance Corporation and IPPs are unwilling to forgo interest payments. This makes tariff relief difficult, as waiving surcharges was seen as crucial for lowering power costs.
Talks with some IPPs are still underway. However, experts say it is unclear whether new negotiations will ease consumer tariffs. Sources in the power ministry noted that if the dispute continues, the government may need approval to pay both the debt and the interest.
The Central Power Purchase Agency (CPPA) is finalising the banking deal. Once cleared, payments of Rs1,257 billion could be disbursed within 15 days.
Data shows there are 18 Chinese IPPs under the China-Pakistan Economic Corridor (CPEC). Between 2017 and 2025, their total billing reached Rs5.48 trillion, of which Rs5.06 trillion has already been paid. The remaining dues stand at Rs423 billion.
Among the largest outstanding amounts are Huaneng Shandong Ruyi with Rs87 billion, Port Qasim Electric Power with Rs85 billion, and China Power Hub Generation with Rs70.4 billion. The Rs423 billion includes Rs15.7 billion in energy purchase costs, Rs230 billion in capacity repayments, and Rs177.7 billion in interest charges.
Officials from the finance and power ministries maintain that arrangements are ready and the deal with banks is near completion. One official highlighted that immediate focus has been on flood response, but efforts to finalise the debt clearance plan continue. The agreed lending rate is KIBOR minus 0.9%, which equals about 10.1%.
With Chinese IPPs unwilling to waive LPS, the issue has become a major stumbling block in Pakistan’s attempt to ease pressure on the power sector before high-level talks with Beijing.
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