In a stark revelation, a senior official has confirmed that Pakistan's outstanding payments to independent power producers (IPPs) have ballooned to a staggering Rs1.2 trillion. This massive sum includes approximately Rs500 billion owed specifically to Chinese power producers operating in the country.
NEPRA Hearing Reveals Financial Strain
The disclosure came during a public hearing conducted by the National Electric Power Regulatory Authority (NEPRA). The hearing, presided over by NEPRA Chairman Waseem Mukhtar, was convened to review a petition from the Central Power Purchasing Agency (CPPA-G) concerning its revenue requirements and market operator fees for the upcoming fiscal year 2025-26.
An official from CPPA-G, responding to questions, laid bare the extent of the sector's financial liabilities. The Rs1.2 trillion in payables underscores the severe cash flow challenges plaguing Pakistan's power purchase mechanism.
CPPA-G Seeks Increased Budget for Operations
In its formal petition, the CPPA-G outlined its financial needs for the next fiscal year. The agency sought a revenue requirement of Rs2.887 billion for FY2025-26 without prior year adjustments. When including prior year adjustments (PYA) and other costs, the requested amount jumps to Rs4.664 billion.
A breakdown of the budget proposal shows significant increases in several areas:
- General Establishment Cost: CPPA-G requested Rs2.225 billion, marking a 10.75% increase from the previous year's audited amount of Rs2.009 billion.
- Salaries, Wages, and Benefits: The agency asked for Rs2.175 billion, a 17% hike over the Rs1.866 billion spent in FY2024-25.
- Pay and Allowances: Proposed at Rs1.627 billion, this is 3% higher than last year's Rs1.575 billion. This cost is indexed to the Consumer Price Index (CPI).
The official noted that the overall increase in personnel costs was tempered by the transfer of 20 employees to the independent System & Market Operation (ISMO) and the resignation of 26 staff members in the previous year.
Administrative Costs and Regulatory Process
Administrative expenses are also set to rise. The CPPA-G has proposed Rs322 million for FY2025-26, compared to Rs301 million in the current year, representing a 6.98% increase.
Following the detailed submissions and questioning, NEPRA has concluded the public hearing and reserved its judgment. The regulator will now deliberate before issuing a final decision on the CPPA-G's petition, which has significant implications for power tariffs and the financial sustainability of the sector.
The hearing has cast a spotlight on the immense circular debt burden, with the dues to Chinese IPPs being a particularly sensitive issue given the strategic nature of the China-Pakistan Economic Corridor (CPEC) energy projects. The resolution of these payables is critical for maintaining investor confidence and ensuring a stable power supply.
