ISLAMABAD: Just ahead of Prime Minister’s expected China visit, Chinese Independent Power Producers (IPPs) are unwilling to waive off Late Payment Surcharges (LPS) along with outstanding amount for clearance of circular debt.
The IMF has also not yet endorsed procedural details of erasing circular debt of Rs1,257 billion, a deal struck with commercial banks by the Government of Pakistan. But so far, this transaction has not yet been materialised.
However, Development Finance Corporation (DFC) and IPPs will not forgo late interest payment. The incumbent regime is facing difficulties because further tariff relief is attached to waiving the interest payment. But, the process of re-negotiating with more IPPs is still underway, and it is yet to be analysed how much it will help in achieving further reduction in tariff.
Prime Minister Shehbaz Sharif is all set to visit China. Chinese Foreign Minister is expected to visit Pakistan during the current month. Minister for Finance Muhammad Aurangzeb is also likely to visit China next month, as Islamabad wants to launch a Panda bond in the next few months.
This stuck amount of Chinese IPPs has surfaced as a major stumbling block so far. The Pakistani side intends to move ahead to resolve it.
“The Chinese IPPs are not letting go of the LPS, so ministry of power may have to get approval to pay interest along with circular debt amount,” top official sources confirmed while talking to The News on Tuesday.
The Central Power Purchase Agency (CPPA) is making final arrangements to strike the deal. After the deal, disbursement of Rs1,257 billion will be made within 15 days.
There are a total of 18 Chinese IPPs under China-Pakistan Economic Corridor (CPEC). In the last nine years, from 2017 to 2025, their total billing stood at Rs5.48 trillion and received payments of Rs5.06 trillion. The outstanding amount stood at Rs423 billion. This indicates Chinese IPPs got 92 percent of their billing amount in the last nine years.
The highest outstanding amount from Chinese IPPs owed to Huaneng Shandong Ruyi (coal) to Rs87 billion, Port Qasim Electric Power Rs85 billion and China Power Hub Generation Rs70.4 billion.
Out of total amount of Rs423 billion, the break-up shows there was an amount of Rs15.71 billion on account of Energy Purchase Price (EPP). There is a capacity repayment amount of Rs230 billion and interest payment of Rs177.7 billion. This outstanding amount comes at more than Rs423 billion of Chinese IPPs.
When contacted, officials from ministry of finance and ministry of power said all arrangements were in place and the deal was likely to be finalised with the banks soon. One official said all the focus was on flash floods after heavy rains in different parts of the country, but a deal to erase circular debt of Rs1,257 billion would be materialised soon. Another official said the deal was struck at a rate of KIBOR minus 0.9pc, meaning its rate would be hovering at 10.1 percent.
