Latest news with #PowerDivision
Business Recorder
2 days ago
- Business
- Business Recorder
Payment dispute between CPPA-G, KE remains unresolved
ISLAMABAD: The Power Division has reportedly failed to resolve a dispute over an excess payment of Rs 7.43 billion between the Central Power Purchasing Agency – Guaranteed (CPPA-G) and K-Electric (KE), which has been pending for over a year, sources within CPPA-G told Business Recorder. In May 2024, the Power Division released Rs 172.8 billion to CPPA-G on account of Tariff Differential Claims (TDC) for KE. In this regard, KE referred to the Power Purchase Agency Agreement (PPAA) between KE and CPPA-G and the Tariff Differential Subsidy Agreement (TDSA) between KE and the Government of Pakistan, both signed in January 2024. According to KE, since the execution of the PPAA, it has fulfilled its obligations and paid Rs 71.5 billion directly to CPPA-G for power purchases—demonstrating its commitment to enhancing liquidity and sustainability within the power sector. As a result, KE states that there are no outstanding payables to CPPA-G after December 31, 2023. Discos, KE's tariffs: CPPA-G seeks up to Rs1.5 negative adjustment Furthermore, the power utility noted that following the release of the TDC by the Power Division on KE's behalf, all dues to CPPA-G up to December 31, 2023, have been cleared. In fact, KE claims it made an excess payment of Rs 7.43 billion, which it seeks to be adjusted against future invoices under the PPAA. KE has requested CPPA-G to issue a credit note of Rs 7.43 billion, to be made directly to KE rather than CPPA-G, in line with the TDS agreement. The utility has sent multiple letters to the Power Division requesting this credit note and seeking that future TDC disbursements related to the post-December 31, 2023 period be released directly to KE, as per the effective TDSA. Most recently, on June 10, KE sent a letter to Additional Secretary (Power Finance), Mehfooz Bhatti, summarizing previous correspondence and reiterating its demand for a Rs 7.43 billion credit note and direct release of future TDC amounts. Sources reveal that CPPA-G has shown willingness to issue a credit note of Rs 3 billion to KE, suggesting that the remaining amount be discussed with the Power Division. However, a final decision is still pending, and neither the Power Division nor CPPA-G has shared any update on the matter. 'KE contends that since it is paying the full amount against invoices issued by CPPA-G, a credit should be issued to facilitate proper accounting adjustments,' the sources added. KE has also requested that the Power Division release the additional amount before June 30, 2025. For FY 2025-26, the subsidy allocated to KE has been reduced by over 28%—from Rs 174 billion in FY 2024-25 to Rs 125 billion. However, an allocation of Rs 1 billion has been earmarked for agricultural tubewells in Balochistan, up from Rs 500 million in the previous fiscal year. Copyright Business Recorder, 2025
Business Recorder
3 days ago
- Business
- Business Recorder
Power sector: federal cabinet approves Rs1.275trn bank loan to cut circular debt
Pakistan federal cabinet approved on Wednesday Rs1.275 trillion loan from commercial banks at 'the lowest-ever rate' to cut its power sector's circular debt. The decision was taken for a permanent resolution of the circular debt in the power sector, the Ministry of Energy (Power Division) said. The loan aims to offset a portion of the circular debt, which currently stands at approximately Rs2.4 trillion. 'Under the plan, Rs1.275 trillion will be acquired from banks at a historic low interest rate — 0.9% lower than the 3-month KIBOR [Karachi Interbank Offered Rate],' it said. 'For the first time, instead of maintaining the circular debt stock at a certain level through previous methods, it will be gradually eliminated with the help of banks.' Circular debt: Govt in talks with banks to raise Rs1.275trn The loan of Rs1.275 trillion would be used to clear dues of independent power producers (IPPs) and retire Power Holding Company Limited (PHL) debt, the Power Division said. 'The acquired loan will also be fully retired over the next six years. This move will not impose any additional financial burden on the national exchequer.' According to the cabinet-approved plan, Rs683 billion of the financing will be used to clear the outstanding dues of the Power Holding Company Limited (PHL) . The loan will be repaid in 24 semi-annual installments, and the interest rate will be 0.9% lower than the 3-month KIBOR. An annual repayment cap of Rs323 billion was set, while a maximum repayment limit of Rs1.938 trillion was set in case of increased interest rates in the future. Business Recorder reported earlier this month that the government had finalised agreements for a historic loan package of Rs1.275 trillion with approximately 18 commercial banks to address the growing circular debt in the power sector. How will govt clear Rs2.4trn circular debt? Pakistan government has committed to the International Monetary Fund (IMF) to clear the circular debt by end of fiscal year 2025, according to the IMF report 'First Review Under the Extended Arrangement Under the Extended Fund Facility, Requests for Modification of Performance Criteria and Request for an Arrangement Under the Resilience and Sustainable Facility' released last month. K-Electric write-offs: NEPRA allows Rs50 billion as 'full and final claim' According to the IMF report, Pakistan government has said that it's on track to achieve net zero circular debt flow for FY25 and will strive for the same in FY26, through 'a combination of timely tariff increases, targeted subsidies, and cost-reducing reforms'. As per the government commitment, the National Electric Power Regulatory Authority (NEPRA) will continue with timely automatic notifications of regular quarterly tariff adjustments (QTAs) and monthly fuel cost adjustments (FCAs) to capture any gaps between the base tariff and actual revenue requirements that arise during the year, to prevent circular debt flow. 'We [Pakistan government] will ensure the full implementation of the July 2025 annual rebasing (new SB, July 1, 2025), QTRs, and FCAs going forward. All provinces agree not to introduce any subsidy for electricity or gas.' Of the existing circular debt stock of Rs2.4 trillion (2.1 percent of GDP), the government committed to clear, by end-FY25, Rs348 billion via renegotiation of arrears with IPPs (Rs127 billion of which will be via already-budgeted subsidy for circular debt stock clearance and Rs221 billion of which will be via CPPA cash flow); Rs387 billion via waived interest fees; and Rs254 billion via additional already-budgeted subsidy for circular debt stock clearance; Rs224 billion in non-interest-bearing liabilities will not be cleared. The remaining Rs1.252 trillion (now Rs1.275 trillion) was committed to be borrowed from banks to repay all PHL loans (PRs 683 billion) and to clear the remaining stock of interest-bearing arrears to power producers (PRs 569 billion), according to the IMF report.
Business Recorder
14-06-2025
- Business
- Business Recorder
Dar says steps under way to enhance financial ties with Turkiye
ISLAMABAD: Deputy Prime Minister and Federal Minister for Foreign Affairs Ishaq Dar said that Pakistan is exploring opportunities to enhance cooperation in financial and logistics services including opening of Turkish banks in Pakistan to support bilateral trade flows. In a written reply to a question in the National Assembly on Friday, the minister said that in support of these efforts, the government is also planning to convene the 6th session of the Pakistan-Turkiye Joint Ministerial Commission (JMC) in Islamabad, revitalising institutional framework for economic cooperation. He said that Turkiye has also expressed strong interest in investing in Pakistan's Special Economic Zones (SEZs). He said that in response, the prime minister has directed the Board of Investment to develop a dedicated investment package for Turkish investors. He said that Pakistan wants to enhance trade and investment cooperation with Turkiye, in line with mutually agreed target of $5 billion by 2025. He said that bilateral trade volume currently stands at approximately $1.02 billion. He said that Pakistan's growing IT sector over $2.6 billion in exports annually, presents substantial opportunities for Turkish investment and joint ventures. He said that Turkish companies are being invited to participate in the Jinnah Medical Complex Project, which aligns with both countries' vision for accessible healthcare. In another written reply to a question, Federal Minister for Energy (Power Division) Sardar Awais Ahmad Khan Leghari said that renegotiating agreements with 36 IPPs (Independent Power Producers) and GPPs, leading to a reduction in the consumer end tariff. He said that the government has also terminated contracts of 06 IPPs leading to saving in capacity cost reduction. He said that the government saved Rs3.612 trillion over the life of the projects through these renegotiations. He said that the negotiations with remaining IPPs are under process and the relief shall be passed on to the consumers once the negotiations are finalised. The minister said that the amount of the circular debt as of March 2025 is Rs2,396 billion. He said that the matter relating to circular debt is being managed under Circular Debt Management Plan (CDMP). Moreover, efforts are being made by the Task Force/ Ministry of Energy (Power Division)/Ministry of Finance to curtail the circular debt. He said that further, an amount of Rs1.2 trillion is being arranged to finance/ refinance the current stock of circular debt. He said that the tenure of this loan will be six years with the interest rate at 6-months KIBOR minus 0.9 per cent. He said that the same will be paid through the Debt Service Surcharge collected from the electricity consumers. Copyright Business Recorder, 2025
Business Recorder
14-06-2025
- Business
- Business Recorder
PD uncertain on power tariff changes from July 1
ISLAMABAD: The Power Division stated on Friday that it currently has no definitive estimate of whether electricity tariffs for distribution companies (Discos) will increase or decrease from July 1, 2025, as this depends on the approval of cost components already submitted to the regulator. These remarks were made by Additional Secretary (Power Finance) Mehfooz Bhatti during a public hearing on the interim distribution and supply tariffs of eight Discos for FY 2025-26 under the Multi-Year Tariff (MYT) regime. The statement came in response to a query raised by textile sector representative Aamir Sheikh. Eight Discos—GEPCO, QESCO, MEPCO, SEPCO, HESCO, PESCO, TESCO, and HAZECO—have submitted tariff petitions under the MYT framework for the five-year period from FY 2025-26 to FY 2029-30, seeking National Electric Power Regulatory Authority (NEPRA)'s approval of a combined revenue requirement exceeding Rs 455.6 billion for the upcoming fiscal year. 'I have no indication at all of what the industry tariff will be from July 1, 2025,' said Aamir Sheikh. 'Our tariff for B3 has dropped to Rs 31/32 (about 11 cents) per unit currently, and the government has committed to reducing it further. We have already booked export orders for the next quarter based on these rates. It's imperative for NEPRA, the Power Division, and the Government of Pakistan to ensure tariffs do not increase beyond May/June levels.' The hearing was briefly suspended by NEPRA Chairman Waseem Mukhtar, who demanded representation from a senior Power Division official. Mehfooz Bhatti eventually joined the session, replacing the Joint Secretary, whose presence NEPRA deemed insufficient. Bhatti, who liaises directly with the Finance Division on power sector subsidies, appeared uncertain regarding the projected tariff changes. 'There is an indication of Rs 250 billion in the budget for Targeted Distribution Subsidy (TDS) for 2025-26. We've already presented seven scenarios to the Regulator. Once the distribution margins are determined under MYT, we'll be in a better position to outline consumer tariffs after incorporating the government's subsidy. At this point, I can't provide figures, but rebasing will take effect from July 1, 2025,' he said. The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) strongly opposed any additional financial burden on consumers for the losses incurred by Discos under the MYT, until comprehensive reforms are implemented. The FPCCI argued that the burden of inefficiencies—including high technical and commercial losses, pension liabilities, and poor governance—is being unfairly transferred to consumers. Rehan Jawed from Karachi raised concerns about the poor performance of Hyderabad Electric Supply Company (HESCO), prompting NEPRA to announce that a verification team will visit HESCO upcoming Monday to investigate consumer complaints. Tanveer Barry of the Karachi Chamber of Commerce and Industry (KCCI) criticized Discos for rising losses due to operational inefficiencies, stating that consumers across Pakistan are unfairly burdened with the DSS surcharge on Power Holding Limited (PHL) loans. 'Discos' technical and commercial losses are worsening, and their recoveries fall short of NEPRA's targets. They haven't submitted investment and distribution plans, and the MYT submissions are incomplete,' Barry said. He emphasized that with power generation capacity projected to increase to 46,605 MW, resulting in higher capacity payments, the Time of Use (ToU) mechanism for industrial consumers should be abolished. He also called for third-party audits of Disco losses to present an accurate picture to NEPRA. CEOs and CFOs of the eight Discos presented details of their proposed distribution margins and expenditures. According to the tariff petition, GEPCO has sought approval of revenue requirement of Rs 67.821 billion of which Rs 16.598 billion is on account of pay & and allowances, Rs 13.815 billion post-retirement benefits, other expenses Rs 4.909 billion (total O&M cost Rs 43.446 billion), depreciation Rs 4.792 billion, RORB Rs 8.750 billion and other income negative Rs 5.418 billion other income and Prior Year Adjustment (PYA) Rs 24.375 billion. MEPCO has sought NEPRA's approval for revenue requirement of Rs 139.106 billion of which, pay and allowances are Rs 22.302 billion, post-retirement benefits Rs 29.384 billion, repair and maintenance, Rs 7.869 billion, travelling allowance Rs 1.936 billion, vehicles maintenance, Rs 1.161 billion, other expenses Rs 507 million (total O&M cost Rs 79.653 billion), depreciation Rs 4.792 billion, RORB Rs 8.750 billion, other income negative Rs 8.731 billion and Prior Year Adjustment Rs 79.453 billion. QESCO's total proposed revenue requirement for FY 2025-26 is Rs 50.120 billion which includes, pay and allowances Rs 9.947 billion, post-retirement benefits, Rs 3.044 billion, repair and maintenance, Rs1.496 billion, travelling allowance, Rs 1.936 billion, vehicles maintenance, Rs 797 billion, other expenses Rs 1.356 billion, (total) O&M cost Rs 17.100 billion), depreciation, Rs 2.944 billion, RORB Rs 15.696 billion, other income negative Rs 1.950 billion and PYA Rs 16.298 billion. SEPCO has sought total revenue requirement of Rs 58.053 billion, of which O&M cost is Rs 22.226 billion, Distribution Margin/Supply Margin, Rs 25.3032 billion, PYA Rs 25.522 billion. TESCO's revenue requirement for FY 2025-26 is estimated to be Rs 7.303 billion of which Rs O& M expense is Rs3.883 billion and DM/SM Rs 5.629 billion. PESCO's total revenue requirement for FY 2025-26 is Rs 81.449 billion which includes O&M expense Rs 37 billion, DM/ SM- Rs 52 billion and PYA Rs 29.344 billion. Hazara Electric Supply Company (HAZECO) which has been bifurcated from PESCO also presented its one-year revenue requirement. HESCO's total revenue requirement for FY 2205-26 is Rs 39.448 billion of which O& M expense is Rs 25.130 billion, DM/SM Rs 33.693 billion and PYA Rs 5.755 billion. HESCO's total revenue requirement is Rs 12.320 billion for the FY 2025-26, which includes O&M Rs 7.883 billion, depreciation, Rs 831 million, RORB Rs 3.028 billion, advance tax Rs 1.129 billion and other income negative Rs 550 million. Copyright Business Recorder, 2025
Express Tribune
11-06-2025
- Business
- Express Tribune
Subsidies trimmed by Rs180b to Rs1.18tr
The Power Division has urged Nepra to align KE's tariff structure with national standards to ensure fairness, transparency and affordability. photo: file Listen to article The government has slashed the allocation for subsidies to Rs1.18 trillion for the upcoming fiscal year 2025-26, of which Rs1.036 trillion will go to the power sector. The government had earlier allocated Rs1.36 trillion in subsidies for the power sector and other commodities, which went up to Rs1.378 trillion for the ongoing financial year, according to revised estimates. With the subsidy allocation for FY26, the government expects to provide some relief for consumers of electricity, petroleum, food, urea, wheat subsidy, and mark-up for low-cost housing. However, it remains uncertain whether the government will be able to stay within the subsidy ceiling or exceed the target, as happened in the outgoing year. According to the Budget Book released on Tuesday, the subsidy bill has been estimated at Rs1.186 trillion for the next fiscal year, a reduction compared to the current financial year's allocation. Out of the total subsidies, a major chunk worth Rs1.03 trillion will go to the power sector compared to Rs1.19 trillion for the ongoing financial year. For the next fiscal year, the government has earmarked Rs249 billion — down from Rs276 billion — for payments for Inter-Disco tariff differential. An amount of Rs40 billion has been set aside for the merged districts of Khyber-Pakhtunkhwa (K-P including Federally Administered Tribal Areas (FATA) subsidy), compared to Rs65 billion allocated during the outgoing fiscal year for FATA subsidy arrears. The government has also set aside Rs74 billion for the next financial year — down from Rs108 billion — for the tariff differential for Azad Jammu and Kashmir (AJK). An amount of Rs48 billion has been earmarked for the Pakistan Energy Revolving Fund (PERA), the same as the ongoing financial year. The subsidy allocation to cover K-Electric's (KE) tariff differential has been slashed to Rs125 billion for the next fiscal year, compared to Rs171 billion allocated during the outgoing financial year. However, the government has increased the allocation to Rs1 billion for agriculture tubewells in Balochistan for KE consumers, up from Rs500 million during the outgoing year. Of the total, the government has allocated Rs95 billion for payments to Independent Power Producers (IPPs) for the next fiscal year. No allocation was originally made for IPPs in the outgoing year, but later Rs115 billion was provided in the revised budget estimates. The government has also allocated a Rs1.2 billion subsidy for petroleum for the next fiscal year, down from Rs18.4 billion. An amount of Rs1.2 billion has been earmarked to meet the shortfall in guaranteed throughput of Pakistan Electric Power Company (PEPCO), down from Rs2.4 billion this year. An allocation of Rs6 billion was also made during the outgoing fiscal year to cover the shortfall of Asia Petroleum; however, no such allocation has been made for the next year. For the ongoing fiscal year, the government had allocated Rs10 billion for domestic consumers through Sui Northern Gas Pipelines Limited (SNGPL), but no allocation has been made for this purpose in FY26. The subsidy cushion for the Pakistan Agricultural Storage and Services Corporation (PASSCO) has been increased to Rs20 billion from Rs12 billion for the current year. Of this, Rs14 billion will go for wheat reserve stocks and Rs6 billion for the cost differential in the sale of wheat. The government has slashed the subsidy allocation to Rs24 billion for the next fiscal year from Rs68 billion for industries and production. Of this, Rs9 billion will go as incentives for electric vehicles (EVs), and Rs15 billion to clear Utility Stores Corporation of Pakistan (USCP) sugar subsidy arrears. No allocation has been made for the Ramazan Package or USCP PM Package. However, the government has increased the allocation to Rs104 billion for 'other subsidies' against Rs75 billion allocated earlier, which rose to Rs90 billion in revised estimates this year. Of this, Rs20 billion will go for wheat subsidies in Gilgit-Baltistan (G-B), and Rs15 billion for imported urea fertiliser. The Naya Pakistan Housing Authority will get Rs1 billion, with an additional Rs7 billion for the mark-up subsidy and risk-sharing scheme for, farm mechanisation, under the Kissan Package. The government will release Rs1 billion for the refinance and credit guarantee scheme (SME Asaan Finance), while Rs5.4 billion has been allocated for SME sector financing enhancement. An allocation of Rs30 billion — up from Rs13 billion — has been made for the mark-up subsidy supporting the phase-out of SBP refinancing facilities. Further allocations include Rs3 billion for 5km radius gas schemes, Rs5 billion for the EFS Enhanced Plan-Exim and Related Scheme, Rs5 billion for housing sector subsidies, and Rs7.3 billion for the Metro Bus subsidy.
