Govt to recover Rs1.938trn from power consumers in 6 years
ISLAMABAD: The federal government is to recover $ 6.7 billion (Rs 1.938 trillion) in six years from power consumers across the country through Debt Service Surcharge (DSS) of Rs 3.23 per unit, which is being uncapped to meet any variation in recovery to meet the target, well informed sources in Power Division told Business Recorder.
Central Power Purchasing Agency-Guaranteed (CPPA-G) and the scheduled banks alongwith allocated amounts will sign the pacts once clarity on worth of assets of few Discos is received by the Power Division.
'There is ambiguity on the total amount to be raised. It will be either 1.21 trillion, Rs 1.25 trillion or Rs 1.275 trillion,' the sources added.
Nepra's decisions on KE tariffs: Power Div. flags potential consumers harm, urges revision
The names of banks, which have entered into the agreement with the CPPA-G as Agent of power Distribution Companies are as follows: (i)Meezan Bank Limited ;(ii) Habib Bank Limited ;(iii) National Bank of Pakistan;(iv) Allied Bank Limited;(v) United Bank Limited ;(vi) Faysal Bank Limited ;(vii) Bank Al Habib Limited;(viii) MCB Bank Limited ;(ix) Bank Alfalah Limited;(x) Dubai Islamic Bank Limited;(xi) The Bank of Punjab ;(xii) Bank Islami Pakistan Limited;(xiii) Askari Bank Limited ;(xiv) Habib Metropolitan Bank Limited ;(xv) Al Baraka Bank Limited ;(xvi) Bank of Khyber ;(xvii) MCB Islamic and ;(xviii) Soneri Bank Limited.
Last week, the federal cabinet approved the following proposals of Power Division with minor amendments in a couple of proposed clauses: (i) CPPA-G has been directed (as agent on behalf of DISCOs) to perform public service obligations and undertake related activities in relation to circular debt stock financing and settlement in terms of Section 7(4) read with Schedule II of the SOE Act as per the proposed terms reflected in the indicative term sheet (Annex-VII) to be executed by CPPA-G for and on behalf of DISCOs and execute 'CD Restructuring, Settlement and Subscription Agreement (CDRSSA)' between the Government of Pakistan, DISCOs and CPPA-G;(ii) Authorized the Ministry of Energy (Power Division) to execute relevant documents as may be required on behalf of the Government of Pakistan per the terms and conditions reflected in the indicative term sheet and to execute the Agreement;(iii) authorized the Ministry of Energy (Power Division) to direct DISCOs to execute relevant instruments and create such security as may be required for the purposes of the financing reflected in the indicative term sheet;(iv) approve the draft amendment in Section 31(8) of the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997 and the draft legislation be made part of the Finance Bill 2025-26;(v) approved immediate release to CPPA-G and utilization of Rs. 267 billion, already budgeted and available in power division demand no 33 under the head of GoP investment in DISCOs equity. Rs. 267 billion would be reduced to the extent of the K-Electric TDS utilization; (vi) approve technical supplementary grant of Rs. 393 billion from finance division demand no. 45 to power division demand no. 33 to be immediately released to CPPA-G under the head of GoP investment in DISCOs equity; (vii) authorized CPPA-G to utilize amounts to pay off the negotiated payables of Government-owned Power Plants (GPPs). Excess amount, if any, after payment of GPPs shall be utilized for payment to Uch-I & Uch-II for onward payment to OGDCL; (viii) authorized CPPA-G to utilize part of the proceeds raised under the aforementioned term sheet to settle and retire the outstanding debt obligations of Rs. 683.253 billion of PHL; (ix) authorized CPPA-G to disburse payments to the respective IPPs from the bank financing subject to waive Late Payment Interest (LPI) by the IPPs; (x) approve the draft amendments in Section 3(3) of the Sales Tax Act, 1990 and Section 113(3)(a) of the Income Tax Ordinance, 2001 and the draft legislation be made part of the Finance Bill 2025-26; (xi) the Term Sheet being negotiated is substantially lower than the banking sector benchmark/interbank profit rates, and to approve the exemption from the bidding under PPRA Rules; and (xii) approve the amendment in Rule-5 of the 'Pakistan Energy Sukuk Rules, 2019' as follows '5-Redemption. - The Sukuk shall be redeemable before maturity'.
On June 18, 2025, the cabinet further directed that the amendments proposed in the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997 in the summary shall be further amended as presented during the Cabinet meeting, and will be made part of the Finance Bill, 2025 after legal vetting by the Law and Justice Division.
The amendments proposed in the statutes will be made part of the Finance Bill, 2025 after legal vetting by the Law and Justice Division and amendments proposed in the rules about term sheets will be vetted from the legal point of view by the Law and Justice Division.
Copyright Business Recorder, 2025
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Recorder
10 hours ago
- Business Recorder
Karachi
Karachi appears to be Pakistan's orphaned child. Once the country's capital, it now holds the dubious distinction of being among the most unliveable cities in the world. Despite contributing over 20% to Pakistan's GDP and hosting around 10% of the nation's population, Karachi struggles significantly to complete critical projects like the BRT and K-4 water supply schemes. Videos highlighting its crumbling infrastructure became memes during the recent India-Pakistan clash, which speaks volumes. For decades, Karachi has absorbed a continuous influx of migrants from various regions of Pakistan, expanding rapidly and without adequate planning, thus becoming a hub for crime and unrest. Despite these challenges, the city has remained Pakistan's economic backbone, functioning as the nation's industrial centre and sole significant link to the global supply chain for seven decades. In short, Karachi has the potential to pull Pakistan out of its financial difficulties with minimal effort—provided it receives proper attention and prioritization. Instead, it consistently receives minimal support. Political parties routinely stage protests against the federal government for neglecting Karachi, yet minor changes. Consider the energy sector, for instance. Karachi hosts the country's only privatized power utility, K-Electric (KE). According to recent communications, KE has become the most improved DISCO since 2009 regarding transmission and distribution losses, reducing its aggregated technical and commercial losses from a staggering 43.2% to approximately 20.3% by 2024. Within Karachi alone, the exempted feeder network increased dramatically from a mere 6.6% to 70%. These achievements, supported by a complete management turnaround, have gained global recognition, including a Harvard Business School case study and positive World Bank reports. However, despite these notable improvements, KE faced significant setbacks, such as delays in the Multi-Year Tariff determination, hindering its financial planning. The private utility, intended as a model for other DISCO privatizations, was inexplicably left in limbo, ultimately punishing Karachi residents more than the company itself. Another example is the denial of Fuel Cost Adjustment (FCA) relief—a substantial amount of Rs4.69 per unit—to KE's customers in a recent NEPRA hearing. The justification given was to maintain a uniform tariff across the country, exemplifying bureaucratic rigidity and the shortsighted decisions of temporary ministers. Karachi is also burdened with inefficiencies from other DISCOs. For nearly two years, Karachi's consumers have borne the Power Holding Limited (PHL) surcharge—debt repayment they did not contribute to or benefit from. Now, due to a new banking agreement, this surcharge is extended for another six years, meaning 72 more months of inflated electricity bills for Karachi residents. Even if the government manages to find buyers for its other DISCOs—a considerable challenge—the current treatment of KE sends a negative message. Potential buyers witnessing such hurdles and neglect may reconsider their interest, fearing similar treatment. Karachi deserves better.
Business Recorder
11 hours ago
- Business Recorder
Punjab budget reflects deliberate realignment of fiscal priorities?
LAHORE: The structure of the Punjab budget for FY 2025–26 reflects a deliberate and disciplined realignment of fiscal priorities. While curtailing non-essential current expenditure, the government has expanded development spending through the largest-ever Annual Development Programme (ADP) in Punjab's history, with 47.3% increase over previous year's ADP. This expansion has been made possible through robust public financial management reforms, including but not limited to the successful retirement of unsustainable commodity operations debt. As per budget document, this year's budget reflects a strategic shift from foundational infrastructure to transformative development. While the first year focused on road connectivity and basic service delivery, FY 2025–26 marks the next logical step i.e., empowering communities through integrated urban development and rural uplift. Transport has emerged as a key priority with a focus on expanding eco-friendly public mobility options, including the introduction of electric buses to reduce urban congestion and environmental impact. The Punjab government has also placed unprecedented emphasis on education—expanding access through scholarships, laptops, school meals, and higher education grants. Health remains a cornerstone, with flagship health initiatives such as Medical City, free medicine, and new centres for cancer and cardiac care. New frontiers in IT, affordable Housing and Climate Action signal the province's ambition to build an inclusive, forward-looking economy, the budget document reveals. On the other hand, the Punjab government, in view of its rapidly increasing annual pension expense and burgeoning accrued pension liabilities accorded approval of the Defined Contribution Pension Scheme. Under the scheme, employees would be contributing for its pension contrary to the defined benefit scheme where government finances solely to the pension. This would significantly reduce the piling of accrued liability, and this has been enacted for the employees joining the government service on or after January 08, 2024. Moreover, the Punjab government has implemented the deregulation of commodity operations of wheat which previously was financed through commercial borrowing from the financial institutions. The scheme had accumulated a circular debt of Rs 629 billion outstanding at June 2022 due to unfunded general subsidy expenditure. The government has eliminated this debt from provincial revenues leading to reduction of commodity debt outstanding down to Rs 13.9 billion at April`25, which is fully backed by the wheat stock leveraging the saving of future debt service in the range of approximately Rs 50 billion per annum. Copyright Business Recorder, 2025
Business Recorder
11 hours ago
- Business Recorder
Punjab Excise Dept achieves record recovery of Rs53.6bn
LAHORE: The Punjab Excise, Taxation and Narcotics Control Department have demonstrated outstanding performance in the fiscal year 2024-25, achieving a historic revenue recovery of Rs 53.6 billion so far. This represents 98% of the annual target of Rs 55 billion. For the first time in the department's history, revenue collection has exceeded Rs 50 billion, a major milestone in the province's revenue generation efforts. These figures were shared during a high-level Directors Conference chaired by Director General Excise Punjab Muhammad Umar Sher. The performance of all regional offices was reviewed in detail, with Faisalabad, Gujranwala and Lahore identified as the top-performing regions. In the month of June alone, revenue recovery surpassed Rs 2.69 billion. Addressing the conference, DG Muhammad Umar Sher instructed all regional directors to formulate micro-level plans to ensure 100% recovery of dues. He emphasized taking decisive action against unregistered vehicles, heavy machinery and token tax defaulters. Immediate and mandatory registration of all vehicles was stressed as a key priority. The DG further stated that no negligence in tax collection will be tolerated. All regional directors have been directed to strengthen recovery through teamwork, strict monitoring and active field visits. Each division has been instructed to prepare and implement its own micro-plan to ensure full achievement of the remaining targets. Muhammad Umar Sher attributed the department's success to effective teamwork, sound policy-making and practical efforts in the field. He expressed confidence that the same spirit and dedication will continue to drive the department's progress in the future. Copyright Business Recorder, 2025
