• Okays Rs960bn sovereign guarantee for Rs1.225tr loans from local banks
• Says remittance incentives to be phased out with caution
• Gas allocated to fertiliser sector; LNG cost adjustments cleared for tariffs
ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet on Friday approved an inter-corporate circular debt settlement plan, including tariff rationalisation for all six operational nuclear power plants in line with other power producers, thus also paving the way to wind up Power Holding Ltd (PHL), a shell company created to park old circular debt.
The meeting of the ECC, presided over by Finance Minister Muhammad Aurangzeb, also approved about Rs960 billion in sovereign guarantees for Rs1.225 trillion in commercial loans from local banks for circular debt settlement and the diversion of gas for fertiliser plants.
As finalised by the military-led task force on power sector reforms in line with similar previous renegotiations with private and government-owned power plants earlier this year, the ECC approved a summary of the Power Division for “rationalisation of tariffs and payment adjustments for nuclear power plants (NPPs), government-owned power plants (GPPs), OGDCL and SNGPL”, a statement said.
The ECC approved the memorandums of understanding (MOUs) with the Pakistan Atomic Energy Commission (PAEC) and authorised the Central Power Purchasing Agency (CPPA) of the Power Division “to execute negotiated settlement agreements based on these MoUs”.
The meeting also authorised the CPPA and the commission to amend the relevant power purchase agreements of four key nuclear power plants, including four at Chashma (C1 to C4) and two at Karachi (K2 and K3), having a total capacity of about 3,500 megawatts.
The federal government would take over some of their financial contractual obligations, for which the ECC also approved a set of facilitation measures. Based on this, the PAEC will file separate tariff petitions for these six plants, in line with the debt adjustments agreed in the negotiated settlement agreements.
In most cases, the government has guaranteed some foreign supplier credits, while in other cases, it has extended cash development loans and charged significantly higher interest rates than the original borrowing cost.
The meeting also authorised the CPPA to pay outstanding liabilities of GPPs from funds available under the circular debt financing facility, worth Rs1.225tr, recently contracted with local banks.
The ECC approved PHL loan repayment of Rs23.6bn and a waiver of Rs119.5bn on late-payment interest receivables from the LNG-based GPPs at Bhikki, Balloki and Haveli Bahadur Shah. It also approved payment of the remaining balance due to OGDCL via the two Uch power plants of over 1,000MW combined.
The ECC also approved policy guidelines to the Oil and Gas Regulatory Authority under Section 21 of the Ogra Ordinance, enabling the incorporation of Rs22bn approved by the federal cabinet to include LNG cost of supply in the consumer tariff, subject to verification by auditors.
The Ministry of Finance said the decision would enhance financial sustainability, streamline payments, and reduce overall costs in the power sector.
Circular debt financing
The ECC approved another summary of the Power Division for the issuance of a government guarantee amounting to Rs659.67bn for circular debt financing of Rs1.225tr. The guarantee is intended for the settlement of Power Holding Limited’s debt and overdue payments to independent power producers.
It authorised the Finance Division to issue a “letter of comfort”, a document that assures one party to another about a potential or existing business or financial obligation.
The Power Division was directed to report back to the ECC on the timeframe for PHL’s closure following the settlement of the debt issue.
The meeting also decided in principle to phase out incentive schemes for banks and exchange companies for channelling home remittances, subject to an appropriate timing, given the State Bank of Pakistan’s warning that immediate action would severely affect healthy inflows.
The ECC also approved a proposal from the Ministry of National Food Security and Research to reallocate funds within the division. The approval allows the transfer of resources from the Inter-Provincial Coordination Division through a technical supplementary grant to support ongoing agricultural research initiatives.
A summary from the Ministry of Maritime Affairs on utilising Pakistan International Bulk Terminal at Port Qasim for handling and exporting copper-gold and other mineral commodities was deferred, with instructions to resubmit a clearer framework after stakeholder consultation.
The Ministry of Interior was granted Rs960 million to ensure timely disbursements to the transferred staff of the Pak Public Works Department for October 2025 to June 2026.
On a Petroleum Division proposal, the ECC approved allocation of about 220m cubic feet of gas from the Ghazij and Shawal fields, diversion from decommissioned/auctioned older plants, and pricing of Mari field gas to fertiliser units to ensure adequate, affordable fertiliser supplies on a structural basis.
Published in Dawn, November 8th, 2025
