Power sector financing nears completion, petroleum debt at Rs2.7tr

May 26, 2025 (MLN): Work on the power sector’s linear bank financing is nearly complete, with disbursement expected within the next two to three weeks.

Regarding petroleum, significant progress has been made in understanding the circular debt problem, which currently stands at approximately Rs2.7 to 2.8 trillion.

This was stated by Muhammad Ali, Special Assistant to the Prime Minister on Power, during a Chartered Financial Analyst (CFA) event in Lahore.

He also provided insights into the newly formed committee addressing petroleum sector reforms, building on prior efforts to resolve the circular debt issue in the power sector.

However, Ali clarified that not all of this amount is circular debt.

Around Rs1.3tr is circular, while the rest is linear, he added.

 He explained that the circular portion primarily consists of the gas price differential owed to Sui Southern Gas Company, with the remainder involving payables between companies like K-Electric and the Steel Mill, which are matters between those private sector entities.

The committee has conducted preliminary assessments and engaged with the IMF and government stakeholders.

Ali expressed hope that with IMF alignment, progress will be made soon.

He also discussed the renegotiation of contracts in the power sector, including private and public Independent Power Producers (IPPs) as well as Qatar LNG agreements.

These renegotiations have been challenging and have negatively impacted domestic energy company production, Muhammad Ali noted.

On the upcoming price reopening in March 2026, Ali acknowledged that conversations should start soon, though no concrete work has begun.

The expectation is that this could provide some relief.

Finally, the government has begun examining how to rationalize gas pricing across consumer categories to encourage increased demand, noting an anomaly where excess local gas supply is currently being curtailed.

Copyright Mettis Link News