Govt Addresses Rs1,275B Loan for Power Debt Cut

Islamabad, July 21, 2025, 02:24 PM PKT — The government is grappling with critical challenges to resolve complexities in disbursing Rs1,275 billion in loans from 18 commercial banks to wipe out circular debt in the power sector, reported The News, amid a Rs2.381 trillion debt burden. Non-revised power purchase agreements (PPAs) with Chinese Independent Power Producers (IPPs) under CPEC, totaling Rs48 billion in dues, complicate payments to other IPPs with revised agreements, forcing a balancing act as methodologies are finalized. Return on Equity (ROE) for government power plants (GPPs) was slashed to 13% in Pak Rupees, with a dollar cap at Rs168 and capacity payments cut to 35%, yielding Re0.44 per unit relief.

Major reforms include terminating PPAs of five IPPs, revising eight bagasse-based plants, and shifting 14 IPPs to a “take and pay” mode, slashing costs by Rs1.43 per unit (including Rs0.77 per unit from terminations). Negotiations with 35 wind power plants (WPPs) progress, though DFI-funded WPPs resist, citing Chinese IPP delays. The Central Power Purchase Agency (CPPA) secured a Rs617 billion loan, repaid over six years via the existing Rs3.23 per unit Debt Service Surcharge (DSS), with no new consumer burden but an extended six-year term. The IMF’s removal of the 10% DSS cap aids debt offloading, targeting a Rs300 billion remainder through efficiency measures. Web context highlights ongoing debt strategies, while posts found on X show skepticism—some question Chinese IPP resistance, others doubt sustainable relief. Critically, the narrative of “debt resolution” may mask structural flaws—web data suggests past failures, and X sentiment hints at distrust in long-term success, pointing to persistent risks.