Pakistan 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
Express Tribune
8 hours ago
- Express Tribune
China lauds Pakistan's diplomatic efforts amid Iran-Israel tensions
Ambassador of China H.E. Jiang Zaidong called on Prime Minister Muhammad Shehbaz Sharif in Islamabad on 24 June 2025. Listen to article China lauded on Tuesday Pakistan's proactive and positive role in pursuing regional peace, particularly through diplomatic channels including the United Nations Security Council, amid heightened tensions following the recent Iran-Israel conflict. On Sunday, the UN Security Council held an emergency session, where China, Russia, and Pakistan jointly called for an immediate and unconditional ceasefire in the Middle East. Chinese Ambassador to Pakistan Jiang Zaidong called on Prime Minister Shehbaz Sharif in Islamabad and the two leaders discussed the evolving regional security situation and matters of mutual interest. Ambassador of China H.E. Jiang Zaidong called on Prime Minister Muhammad Shehbaz Sharif. — Government of Pakistan (@GovtofPakistan) June 24, 2025 During the meeting, the Chinese envoy praised Pakistan's consistent efforts at international forums for a peaceful resolution to regional challenges, emphasising the need for dialogue and diplomacy. Earlier today, the premier also met separately with the ambassadors of Saudi Arabia and Qatar to discuss the rapidly deteriorating Middle East situation, particularly in the wake of Iran's missile strike on the United States' Al Udeid Air Base in Qatar. The missile attack, carried out late Monday night, came amid Iran's vows to retaliate for recent US airstrikes on its nuclear facilities. Shehbaz reaffirmed Pakistan's unwavering solidarity with the people of Saudi Arabia and Qatar and stressed that diplomacy remained the only path to lasting peace in the region. Read: PM speaks with Qatar, Saudi envoys Ambassador Jiang also briefed Shehbaz on various dimensions of Pakistan-China bilateral cooperation and informed him that preparations were already underway to ensure the success of Shehbaz's upcoming visit to China, scheduled for late August 2025. PM Shehbaz extended his warm regards and good wishes to Chinese President Xi Jinping and Premier Li Qiang. He expressed his sincere best wishes for the successful holding of the upcoming Shanghai Cooperation Organisation (SCO) Summit and acknowledged the ongoing consultations between the two countries regarding his participation in the event. Recalling the historic, deep-rooted, and iron-clad 'All Weather Strategic Cooperative Partnership' between Pakistan and China, Shehbaz reaffirmed Islamabad's firm commitment to work closely with Beijing on the timely and effective implementation of key projects under the China-Pakistan Economic Corridor (CPEC). He highlighted several priority initiatives, including the Main Line-1 (ML-I) railway upgrade, the realignment of the Karakoram Highway (KKH), the operationalisation of Gwadar Port, and extended cooperation in agriculture, industrial development, and the IT sector. Read more: Global turmoil If Iran shuts Strait of Hormuz — but Pakistan may get a pass The prime minister expressed Pakistan's deep appreciation for China's long-standing financial and economic support, stating that Beijing's assistance had helped stabilise Pakistan's economy and contributed to the improvement of the country's macroeconomic outlook. This support, he noted, was vital for achieving the government's broader socio-economic development agenda. In response, Ambassador Jiang reaffirmed China's commitment to its strategic partnership with Pakistan and reiterated Beijing's support for regional peace, stability, and deeper economic integration. In a separate development, the Foreign Office on Tuesday released a statement expressing Pakistan's deep concern over the growing regional tensions. It strongly condemned violations of the principle of respect for sovereignty and territorial integrity of all nations and urged all sides to adhere to international law and exercise restraint. The statement also reiterated Pakistan's consistent position that dialogue and diplomacy remain the only viable path to resolving conflicts, and called for immediate steps to de-escalate tensions to avoid further destabilisation in the region.
Business Recorder
17 hours ago
- Business Recorder
Pakistan 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
Business Recorder
18 hours ago
- Business Recorder
The provincial budgets of FY26
The four provincial budgets were announced last week. The first budget presented was that of Sindh, followed by Punjab, Khyber-Pakhtunkhwa and Baluchistan. The provincial budgets for 2025-26 are expected to be in line with the projections agreed with the IMF as revealed in the IMF Staff Report of 17th of May. This report was released following the successful completion of the first review of the three-year Extended Fund Facility. There has been a visible shift of focus towards the fiscal performance of provincial governments in the IMF Programme. Performance criteria and indicative targets include the public expenditures on health and education, which are mostly by the provincial governments. In addition, the four provincial governments combined are expected to achieve a target level of tax revenues and a pre-specified level of provincial cash surplus. This is to bring down the consolidated budget deficit and facilitate the achievement of a target level of primary surplus. The IMF Staff Report indicates the following expectations regarding provincial budgets in 2025-26: (i) Growth rate in provincial own-tax revenues of over 27 percent. This is linked to the effective implementation and significant generation of revenues from the new Agricultural Income Tax Act, legislated by each Provincial government in the beginning of 2025. (ii) Moderate growth in current expenditure of under 15 percent, to provide fiscal space for enhanced allocations to education and health. (iii) Modest growth rate of 12 percent in development expenditure from the likely level of Rs 1870 billion in 2024-25 to Rs 2100 billion in 2025-26. (iv) Generation of a sizeable combined provincial cash surplus of Rs 1500 billion, implying a big jump of 50 percent over the likely level of Rs 1000 billion in 2024-25. The above expectations are based on a rapid growth in federal transfers to the four provincial governments combined of 22 percent. The fundamental question is whether the four provincial budgets are consistent with the realisation of the above targets. The first critical magnitude is that of the projected size of federal transfers to the provinces. The federal budget document, Budget in Brief of 2025-26, reveals that the total transfers consisting of NFC Divisible Pool transfers, straight transfers and grants will aggregate to Rs 8206 billion, with the growth rate of 17.3 percent. This is somewhat lower than the expectation of 22 percent growth. The next critical target in the IMF Programme is extraordinary growth in provincial own-tax revenues, facilitated by substantial higher collections from the agricultural income tax. The truly surprising discovery from the four provincial budget documents is that the overall national collection from the agricultural income tax will be only Rs 19 billion. Surely, with the same income tax rate as for non-agricultural incomes and with agricultural incomes approaching 22 percent of the economy, the revenue estimate should have been in hundreds of billions. A feasible target of Rs 150 billion could have been set for the first year in 2025-26, with due allowance for the low outputs from wheat and cotton. Clearly, the powerful lobby of the very large farmers has prevailed once again. There is substantial variation in the budgeted growth of current expenditure in 2025-26 by the four provincial governments. The highest growth rate that has been set is by the government of Sindh at 25.3 percent and the lowest at 0.9 percent by the government of Punjab. Combined the growth rate of current expenditure is 14.8 percent, which is in line with the IMF expectations. However, the four provincial governments have set very ambitious growth rates for development spending. It ranges from a maximum of 43.6 percent in the case of Baluchistan to a low of 11.9 percent in Punjab. Combined, the proposed level of development expenditure is Rs 3105 billion. This is substantial larger than the level indicated for 2025-26 in the IMF Staff Report of Rs 2099 billion. Clearly, the provincial governments are proposing to promote growth through investment in infrastructure and services. We come now to effectively the bottom line, corresponding to the targeted magnitude of the cash surplus by each provincial government. There is substantial variation here also. The government of Punjab hopes to generate a large cash surplus of Rs 943 billion, which is 41 percent higher than the likely level this year. This will be equivalent to 63 percent the combined national targeted cash surplus of Rs 1500 billion indicated by the IMF. The big surprise is that the government of Sindh expects the provincial budget to actually be in deficit of Rs 38 billion. This is very unusual since limits have been placed on borrowings by provincial governments. The Khyber-Pakhtunkhwa and Baluchistan governments have shown small surpluses of Rs 126 billion and Rs 51 billion, respectively. Overall, given the provincial budgets, the combined provincial cash surplus is targeted at Rs 1082 billion, significantly below the amount revealed in the federal budget of Rs 1500 billion, and Rs 1500 billion also in the IMF Staff Report. Consequently, this will increase the consolidated budget deficit by 0.4 percent of the GDP and reduce the primary surplus from 2 percent to 1.6 percent of the GDP. Overall, the provincial budgets have generally been disappointing. The agricultural income tax is not being effectively implemented. Other taxes like the urban immoveable property tax and the sales tax on services continue to remain underdeveloped. There is under-budgeting of the cost of increasing salaries and pensions, which will further reduce the provincial cash surplus. The time has come for much greater focus on the finances of provincial governments. They now account for 30 percent of national public expenditure but finance only 17 percent of this expenditure. The first time focus in the IMF on key provincial budget magnitudes needs to be sustained and strengthened whenever necessary, especially on mobilization of substantially larger revenues. Copyright Business Recorder, 2025
