Govt disburses Rs62.75 bn to 17 IPPs in a move to lower circular debt

In a significant move to address the persistent issue of circular debt within the energy sector, the government has disbursed a total of Rs62.75 billion to 17 Independent Power Producers (IPPs).

Among the recipients of these funds, the National Power Parks Management Company Private Limited received the largest allocation of Rs14.5 billion. Thar Coal Block-1 Power Generation Company (Pvt) Limited was granted Rs5.75 billion, while Karachi Nuclear Power Plant-Unit-2 received Rs3.8 billion. Quaid-e-Azam Thermal Power (Pvt) Limited and Engro Powergen Thar (Pvt) Limited received Rs3.75 billion and Rs3.6 billion, respectively.

Other IPPs also received disbursements, including Karachi Nuclear Power Plant-Unit-3 Rs3.2 billion, China Power Hub Generation Company (Pvt.) Ltd Rs3.1 billion, Punjab Thermal Power Private Limited Rs1.75 billion and ThalNova Power Thar (Pvt.) Ltd Rs1.3 billion.

Furthermore, Huaneng Shandong Ruyi Energy (Pvt) Ltd, Port Qasim Electric Power Company (Pvt.) Limited, and Karot Power Company (Pvt) Ltd each secured Rs4.6 billion. Uch Power (Pvt) Limited and Uch-II Power (Pvt) Limited both received Rs1.7 billion, while Lucky Electric Power Company Limited and Thar Energy Limited were granted Rs2.4 billion each.

It is worth noting that over 50% of the total disbursement, amounting to Rs62.75 billion was channeled to just five IPPs.

Circular debt, a long-standing issue in the energy sector, refers to a payment deficit at the Central Power Purchasing Agency (CPPA). This deficit arises due to the failure of power distribution companies (DISCOs) to collect revenues efficiently from consumers. The entities affected by this inefficiency include both state-owned distribution companies (DISCOS) and the privatised K-Electric (K-El).

Consequently, the CPPA is unable to make timely payments to other entities in the power supply chain, including state-owned generation companies (GENCOs), IPPs, and the National Transmission and Dispatch Company (NTDC).

As fiscal year 2023 nears its conclusion, the circular debt within the power sector has escalated to a staggering Rs2.31 trillion. This is an increase from the Rs2.25 trillion recorded at the end of the previous fiscal year, though it marks a reduction from the Rs2.631 trillion observed in April 2023.