CPPA nearing deal with banks for Rs1,275bn loan

ISLAMABAD: The agreement between the Central Power Purchase Agency (CPPA-G) and 18 commercial banks for Rs1,275 billion loan to be utilised to reduce circular debt to Rs339 billion is likely to be signed on August 12 next week.

The amount will be transferred into the account of CPPA and will be utilised to offload loans of Rs683 billion parked in Power Holding Company Limited (PHL).

The remaining stock of interest bearing arrears amounting to Rs569 billion to the government power plants (GPPs), including nuclear power plants and CPEC projects, will be paid and circular debt will be squeezed to Rs339 billion, a senior official of the Power Division told this scribe.

“All the required prerequisites will be finalised with commercial banks by next week for Rs1,275 billion loan,” he said.

The power sector circular debt has already tumbled to Rs1.614 trillion from Rs2.381 trillion after successful negotiations of Task Force on Power Sector with more than 35 IPPs and termination of six contracts. The Task Force’s endeavours have resulted in saving of Rs3,600 billion in the remaining period of contracts.

The IMF has been told that the Task Force on Power Sector, comprising Adviser to PM on Privatisation Muhammad Ali, Lt General Zafar Iqbal and official experts from SECP, CPPA-G and NEPRA, through negotiations with IPPs, got cleared arrears of Rs348 billion (Rs127 billion through budgeted subsidy and Rs221 billion paid by CPPA).

The Task Force, however, has already managed to get Late Payment Interests (LPIs) of IPPs amounting to Rs387 billion waived off. The amount of Rs254 billion has been cleared through an additional budgeted subsidy for circular debt clearance.

After payments of Rs1,275 billion by CPPA, circular debt will be reduced to Rs339 billion. This remaining stock will be dealt with through reforms and efficiency of DISCOs.

The electricity consumers will retire the loan of Rs1,275 billion through Debt Service Surcharge (DSS) of Rs3.23 per unit, which is already in place. They are already paying it through electricity bills. There will be no new burden on consumers.

However, consumers under the latest scenario, will continue to pay it for the next six years to offload loan of Rs1,275 billion.

The official said surcharge of Rs3.23 per unit is already in place. It will now last for six years to pay the loan.