The federal government has taken a significant step toward reducing circular debt and improving the financial structure of the power sector by approving a one-time payment of Rs. 89.5 billion from the Central Power Purchasing Agency (Guaranteed) — CPPA-G — to OGDCL on behalf of Uch Power Ltd. and Uch-II Power Ltd. According to sources, the payment will be made under the circular debt financing facility, replacing the earlier plan of paying the amount in 18 equal monthly installments.
This decision was approved by the Economic Coordination Committee (ECC) based on a summary from the Power Division titled “Rationalization of Tariff for Nuclear Power Plants and Reduction in LPI.” Earlier, on August 4, 2024, the Prime Minister had formed a task force to introduce structural reforms in the power sector, which evaluated ways to reduce the tariff of nuclear power plants to provide relief to electricity consumers.
After multiple rounds of negotiations with the Pakistan Atomic Energy Commission (PAEC), the task force finalized several MoUs involving tariff reductions in exchange for various government facilitation measures. Under the agreement, the power purchaser accepted outstanding dues worth Rs. 316.937 billion as of December 31, 2024, while PAEC agreed to waive all Late Payment Interest (LPI) accrued until that date. Additionally, beginning January 1, 2025, the rate of delayed payment surcharge has been revised to three-month KIBOR + 1% per annum.
Sources reveal that the government made total payments of Rs. 614.92 billion to state-owned power plants—including nuclear plants—yet outstanding dues of Rs. 150 billion remained as of July 31, 2025. The circular debt financing facility will continue to be used for future payments under this framework.
CPPA-G has also been authorized to use funds from this facility to pay off Rs. 683.253 billion in loans previously arranged by Power Holding Limited (PHL). During this period, Rs. 23.6 billion in loan repayments were made in July 2025 via the Power Division to prevent default.
The task force further noted that three power plants—Nuclear Power Plants, Nandipur, and Quaid-e-Azam Thermal Power—have withdrawn all LPI claims up to December 31, 2024, amounting to Rs. 119.53 billion.
Earlier, the federal cabinet had approved the waiver of Rs. 54 billion in LPI owed to OGDCL by Uch Power Ltd. and Uch-II, along with payment of the Rs. 89.5 billion principal amount due by December 31, 2024. Although the initial plan involved installment-based payments over 18 months, worsening financial constraints at OGDCL and the availability of circular debt financing prompted the shift to a one-time full payment.
Additionally, the cabinet approved waiving Rs. 68.6 billion in outstanding LPI for Sui Northern Gas Pipelines Ltd. (SNGPL) related to LNG supply issues. Under a revised agreement addressing the “take-or-pay” dispute, the minimum LNG offtake ratio will now remain at 66%.
The task force also recommended that Rs. 21.9 billion in LNG cost adjustments be incorporated through OGRA to provide consumer relief. However, OGRA expressed concerns that such an adjustment could increase LNG prices for end-users. The government has been advised to issue a policy guideline under Section 21 of the OGRA Ordinance (2002) so the adjustment can be implemented legally.
