Govt to recover $6.7 billion from power consumers in six years through Debt Service Surcharge

The federal government is set to introduce a Debt Service Surcharge (DSS) of Rs 3.23 per unit on power consumers across Pakistan to recover $6.7 billion (Rs 1.938 trillion) over the next six years. The move aims to address circular debt issues and support the local power sector, Business Recorder reported, citing sources. 

According to the news report, the surcharge would be uncapped, meaning it can adjust to any variations in the recovery needed to meet the target amount. The government, through the Central Power Purchasing Agency-Guaranteed (CPPA-G), will work with several scheduled banks to formalise the recovery process once the final valuation of assets for a few Distribution Companies (Discos) is clarified.

There is some ambiguity regarding the exact total amount to be raised, with estimates ranging between Rs 1.21 trillion and Rs 1.275 trillion.

The following banks have entered into agreements with CPPA-G to act as agents on behalf of the Distribution Companies (Discos): Meezan Bank Limited, Habib Bank Limited, National Bank of Pakistan, Allied Bank Limited, United Bank Limited, Faysal Bank Limited, Bank Al Habib Limited, MCB Bank Limited, Bank Alfalah Limited, Dubai Islamic Bank Limited, The Bank of Punjab, Bank Islami Pakistan Limited, Askari Bank Limited, Habib Metropolitan Bank Limited, Al Baraka Bank Limited, Bank of Khyber, MCB Islamic, and Soneri Bank Limited.

In related developments, the federal cabinet approved several proposals from the Power Division to address circular debt financing and settlement. This includes empowering CPPA-G to execute a restructuring agreement with the government and Discos, and directing the Ministry of Energy to handle the necessary documentation. 

Additionally, the cabinet approved technical supplementary grants for CPPA-G and authorised it to use the raised funds to clear outstanding debt obligations, including payments to government-owned power plants and independent power producers (IPPs).

Amendments to the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997, and the Sales Tax Act, 1990, were also approved, with the revised legislation to be included in the Finance Bill 2025-26. 

The cabinet further authorized CPPA-G to issue Sukuk bonds and make amendments to the Pakistan Energy Sukuk Rules, 2019.

The measures are part of the government’s broader efforts to resolve circular debt issues and ensure financial stability in the energy sector. The proposed legislation and rules are set to be included in the Finance Bill 2025, following legal vetting by the Law and Justice Division.