Islamabad:
The Government managed to restrict the outstanding quotas of the energy projects of the China-Pakistan Economic Corridor (CPEC) to RS423 billion for June of this year, which could also be resolved soon, subject to the early resolution of the issuance of interests on late payments.
Official documents showed that at the end of fiscal year 2024-25, energy payments pending Chinese power plants amounted to RS423 billion. These were RS22 billion, or 5.5%, more than the previous fiscal year.
The details showed that since 2017, the country has paid RS5.1 billions in energy costs at the 18 Chinese electric power plants, which were equal to 92.3% of the invoiced amount, including interests. Pakistani authorities believe that the real remaining energy cost was less than RS300 billion and the rest of the amount was due to late payment surcharges.
The Government is in the process of taking almost RS1.3 billion on fresh loans from local commercial banks to withdraw the circular debt due to state electrical plants, nuclear plants, private property plants and Chinese plants.
According to one of the conditions established by the federal cabinet, the authorities will negotiate with energy producers to renounce interest payments in exchange for receiving complete payments, said a government official who is part of these discussions.
The Chinese cannot give up the cost of interest due to their internal requirements, which would leave the government with the option of making complete payments at once or clean the fees as the fiscal space is created.
The unpaid debts of RS423 billion violate the 2015 CPEC Framework Framework Agreement, which unites the Government to completely clean the quotas, regardless of whether the authorities can recover the amounts of the final consumers.
Together with security, the lack of compliance with CPEC contracts is one of the reasons for slow progress in financial and commercial relations between the two nations. Prime Minister Shehbaz Sharif Visit China is expected next month, and one of the items on the agenda is to attract Pakistan Chinese investors addressing their concerns.
According to the CPEC Energy Framework Agreement, Pakistan had to create a rotating fund with 21% of energy invoices to protect Chinese companies from the circular debt crisis. However, the previous government opened a rotating energy account of Pakistan in the State Bank of Pakistan in October 2022 with RS48 billion in annual assignments. But it limited the withdrawals to RS4 billion per month, which led to the current debt shares of RS423 billion.
The documents show that Pakistan must RS87 billion to the Sahiwal Energy Plant of imported coal, while the company received RS1.14 billion in the last eight years of its operations. The country also owes RS69 billion to the energy center of the coal center, compared to total claims worth RS834 billion.
The outstanding quotas of the Port Qasim carbon energy plant were 85,500 million rupees, compared to the total bills of more than RS1 billion. The fees of the Port Qasim plant were approximately RS15 billion higher than the previous fiscal year.
The fees of the Thar Coal project remained at RS55.5 billion. He had claimed quotas worth RS566 billion. The outstanding quotas of Karo Power Company were RS11 billion, Engro Powergen Thar Coal RS38 billion, the Matiari Lahore RS28.5 billion transmission line and Thaha Energy limited RS8.3 billion.
The Chinese government has repeatedly raised this problem with Pakistan through diplomatic channels, including Pakistan’s embassy in Beijing and its own embassy in Islamabad.
It is expected that once commercial banks and federal government entities complete the procedure formalities and federal government entities, the amounts of circular debt would begin to fall.
The Government had reached an agreement with commercial banks to borrow RS1.25 billion at less than an interest rate of 11% as part of its three -pointed strategy to eliminate the circular debt and restore the viability of the electricity sector.
Banks are expected to disburs the loans shortly after compliance with the procedure requirements.
It is said that the agreement is approximately 3% to 5% cheaper than interest in existing facilities and sanctions that the Government pays for not making timely payments of energy purchases. The RS1.25 billion debt is being taken in the books of the Central Purchase Agency of Power (CPPA), and would not be part of the general public debt.
The Government was paying up to 14% cost to commercial banks for the loans that it had taken in the past to withdraw the circular debt, and a price of up to 16% for independent energy producers (IPP) for not making timely payments.
Of the total existing circular debt actions of RS2.4 billion RS2.4, it is necessary to reassure the main amounts of RS1.5 billion to eliminate debt actions.
Of the RS1.25 billion, around RS660 billion will be resolved against the power that has limited debt. This debt had been obtained in the past at a more Kibor rate to 2%. The powers of the nuclear plant will obtain around RS280 billion, while the LNG power plants are expected to receive RS220 billion.
The previous efforts of Pakistan to reprogram the energy debt have not been successful, according to government sources. The Minister of Finance, Muhammad Aurengzeb, and the Minister of Energy, Sardar Awais Laghari, led these efforts.
Pakistani officials had requested an extension of five to eight years to pay the energy debt, convert interest payments based on US dollars to the Chinese currency and reduce general interest rates for CPEC projects and not financed by China.
