Govt aims to tackle power sector debt with Rs130bn settlement plan

December 19, 2023 (MLN): Taking a significant stride in addressing the persisting circular debt issues within the energy sector, the government has allocated for disbursement a substantial settlement of Rs130 billion for Government-owned Power Plants (GPPs), according to the sources.

The settlement will help alleviate the escalating circular debt burden in the power sector. It will also involve a partial settlement of the gas circular debt through GPP payments to major Petroleum sector entities, primarily PPL and Sui companies.

This strategic move is poised to impact reducing the circular debt plaguing the power sector substantially.

During the current fiscal year, an amount of Rs262bn has been allocated against the Finance Division as a lump sum provision for Power Subsidy.

Finance Division has been taken on board and it has been agreed that out of Rs262bn, an amount of Rs131.035bn may be released in the 2nd Quarter and the remaining amount of Rs131bn may be released in the 3rd quarter of FY24, according to the documents available to Mettis Link News.

Given the above, approval of the Technical Supplementary Grant of Rs262bn in Investment Head A014 under Power Division's demand release of the same as investment in DISCOs, is required.

The said amount is to be distributed for the 2nd quarter as payment of Rs131bn to GPPs i.e. Rs26.78bn to GENCO-II; Rs2.965bn to GENCO-III; Rs83.63bn to WAPDA, Rs16bn to Quaid-e-Azam Thermal Power (RLNG) and Rs1.635bn to Quaid-e-Azam Solar Power. 

Previously, media reports disclosed that the Finance Division required expenditure particulars regarding the Rs601bn allocated to the Power Division for settling obligations of Independent Power Producers (IPPs) and GPPs.

The Power Division has been asked to furnish a position paper regarding the outcomes linked to the IPPs/GPPs settlement plan. 

However, a response is pending regarding the decrease in capacity payments, utilization of tariff discounts, decline in delayed payment exchanges, impact on reducing circular debt stock, mitigation of circular debt flow, reduction in available O&M, exchange rate of US$ and US CPI indexation, and any additional financial benefits for the government.

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