Financial matters must be submitted to CCoE: Cabinet

MUSHTAQ GHUMMAN

ISLAMABAD: The Cabinet has directed that all financial matters pertaining to the energy sector be submitted to the Cabinet Committee on Energy (CCoE) for strategic decision-making across the sector, well-informed sources told Business Recorder.

These directions were issued as the Cabinet ratified an ECC decision titled “Rationalization of LPI and Potential Tariff Reduction for Nuclear Power Plants (NPPs) — C-1, C-2, C-3, C-4, K-2 & K-3.”

The ECC also approved a proposal stipulating that policy guidelines be issued under Section 21 of the OGRA Ordinance, 2002, enabling the OGRA to incorporate Rs 21.9 billion—already approved by the Federal Cabinet and subject to auditors’ verification—into the cost of supply of RLNG and system gas. Details of this adjustment had been shared with the Cabinet.

The ECC further directed that, to ensure better coordination and alignment, matters related to the power and petroleum sectors should be submitted to the CCoE for sector-wide strategic decisions.

According to the decision, the Central Power Purchasing Agency-Guaranteed (CPPA-G) will pay Rs 89.5 billion to the Oil and Gas Development Company Limited (OGDCL) on behalf of Uch Power Limited (UPL) and Uch-II Power Limited (UPL-II) from the circular debt financing facility. This will be executed as a lump-sum payment instead of the earlier plan of 18 equal monthly instalments.

This payment forms part of a broader rationalization plan approved by the ECC on a Power Division summary regarding tariff reductions for Nuclear Power Plants (Chashma-1 to 4 and K-2/K-3). Sources said a Task Force on structural power sector reforms—established by the Prime Minister on August 4, 2024—conducted a detailed assessment of potential tariff reductions aimed at providing relief to electricity consumers.

After multiple rounds of negotiations, the Task Force finalized Memoranda of Understanding (MoUs) with the Nuclear Power Plants. A tariff reduction mechanism was mutually agreed upon, which includes:

(i) payment of the outstanding balance of Rs 316.937 billion as of December 31, 2024, by the power purchaser;

(ii) the Pakistan Atomic Energy Commission (PAEC) waiving all rights and claims to late payment interest (LPI) up to December 31, 2024;

(iii) from January 1, 2025, PAEC agreeing that the Delayed Payment Rate under the PPA will be the three-month KIBOR + 1% per annum for overdue principal invoices, calculated on actual days and a 365-day year, without compounding; and

(iv) facilitation measures to be provided by the Government of Pakistan as part of the negotiated arrangements.

Sources added that Rs 614.92 billion had already been disbursed to Government Power Producers (GPPs), including NPPs. As of July 31, 2025, the outstanding liabilities toward GPPs stood at Rs 150 billion, to be settled from the proceeds of the circular debt financing facility.

The CPPA-G had earlier been authorized to use part of these proceeds to retire Rs 683.253 billion in outstanding Power Holding Limited (PHL) debt. During Cabinet consideration, it was expected that the CD financing facility would be signed before July 2025, allowing timely retirement of PHL loans. Consequently, Rs 24 billion was shifted from Finance Division Demand No. 45 to Power Division Demand No. 33 for GPP payments through TSG. However, a loan of Rs 23.607 billion maturing in July 2025 was paid from the Power Division’s allocation to avoid default.

Sources said the Task Force also negotiated LPI waivers with three GPPs—NPPMCL Haveli Bahadur Shah, NPPMCL Balloki, and Quaid-e-Azam Thermal—up to December 31, 2024. The negotiated settlement states that the companies “waive, abandon and relinquish rights and claims with respect to late payment interest… including all LPI arising on payments made up to December 31, 2024.” The updated total LPI waiver therefore amounts to Rs 119.53 billion, replacing the earlier figure of Rs 87.58 billion approved in the Cabinet’s decision of March 19, 2025.

The Cabinet also approved the waiver of Rs 54 billion in LPI by OGDCL for UPL and UPL-II up to December 31, 2024, and earlier approved payment of the outstanding Rs 89.5 billion principal in 18 instalments via CPPA-G. However, considering OGDCL’s liquidity constraints, its agreement to waive LPI, and the availability of the Rs 1,275 billion CD financing facility, the Task Force recommended a lump-sum disbursement of Rs 89.5 billion instead. CPPA-G has confirmed that, as of October 22, 2025, ten instalments have already been paid.

In its March 19, 2025 decision, the Cabinet had also approved an LPI waiver of Rs 68.6 billion in the accounts of SNGPL relating to RLNG supplies to NPPMCL Haveli Bahadur Shah, NPPMCL Balloki, Quaid-e-Azam Thermal, and Nandipur Power Plant. A longstanding dispute regarding the minimum Take-or-Pay arrangement—originally 66% for RLNG supplies—was also resolved. The ECC decision of January 11, 2023 had lowered the requirement to 0% for Quaid-e-Azam Thermal and 33 percent for Haveli and Balloki. The Task Force resolved the matter in SNGPL’s favour, maintaining 66% until December 31, 2024, and revising it to 50% thereafter, with a mutually agreed calculation mechanism. The associated financial impact of Rs 21.9 billion, subject to auditor verification, was approved by the Cabinet.

The Task Force was further informed that pricing mechanisms for system gas and RLNG operate under separate policy regimes. However, it recommended that verified net Take-or-Pay proceeds be credited to RLNG revenues to reduce RLNG costs for consumers. To implement this within Ogra’s RLNG cost-of-service framework under Section 43(b) of the OGRA Ordinance, the Federal government must issue a policy guideline under Section 21, enabling Ogra to incorporate the Cabinet-approved Rs 21.9 billion adjustment into the RLNG cost of supply.