Govt Ready to Slash Circular Debt to Rs. 561 Billion

The federal government is set to reduce the power sector’s circular debt from Rs. 2.381 trillion to around Rs. 561 billion by disbursing Rs. 1,275 billion obtained through loans from 18 commercial banks after approval by the International Monetary Fund (IMF). The amount will be released this week or next and will be used by the Central Power Purchase Agency-G (CPPA-G) to fully retire Rs. 683 billion in Power Holding Limited (PHL) liabilities and clear Rs. 569 billion in interest-bearing dues owed to power producers, reported a news daily. Once the payment process is completed, the revised circular debt figure will be published on the Power Division’s official website. The government’s Task Force on Power Sector has also played a key role by securing Rs. 387 billion in Late Payment Interest (LPI) waivers from independent power producers (IPPs). Rs. 348 billion in arrears were cleared earlier: Rs. 127 billion through budgetary subsidy and Rs. 221 billion by CPPA-G. A remaining Rs. 561 billion will persist as circular debt, including Rs. 224 billion in non-interest-bearing and Rs. 337 billion in interest-bearing liabilities. To repay the Rs. 1,275 billion loan, electricity consumers will continue paying the existing Debt Service Surcharge (DSS) of Rs. 3.23 per unit for the next six years. This surcharge is not new and is already being collected. Although it previously had a 10 percent cap, the cap has been removed following IMF requirements.