Govt to recover Rs1.938trn from power consumers in 6 years
ISLAMABAD: The federal government is to recover $ 6.7 billion (Rs 1.938 trillion) in six years from power consumers across the country through Debt Service Surcharge (DSS) of Rs 3.23 per unit, which is being uncapped to meet any variation in recovery to meet the target, well informed sources in Power Division told Business Recorder.
Central Power Purchasing Agency-Guaranteed (CPPA-G) and the scheduled banks alongwith allocated amounts will sign the pacts once clarity on worth of assets of few Discos is received by the Power Division.
'There is ambiguity on the total amount to be raised. It will be either 1.21 trillion, Rs 1.25 trillion or Rs 1.275 trillion,' the sources added.
Nepra's decisions on KE tariffs: Power Div. flags potential consumers harm, urges revision
The names of banks, which have entered into the agreement with the CPPA-G as Agent of power Distribution Companies are as follows: (i)Meezan Bank Limited ;(ii) Habib Bank Limited ;(iii) National Bank of Pakistan;(iv) Allied Bank Limited;(v) United Bank Limited ;(vi) Faysal Bank Limited ;(vii) Bank Al Habib Limited;(viii) MCB Bank Limited ;(ix) Bank Alfalah Limited;(x) Dubai Islamic Bank Limited;(xi) The Bank of Punjab ;(xii) Bank Islami Pakistan Limited;(xiii) Askari Bank Limited ;(xiv) Habib Metropolitan Bank Limited ;(xv) Al Baraka Bank Limited ;(xvi) Bank of Khyber ;(xvii) MCB Islamic and ;(xviii) Soneri Bank Limited.
Last week, the federal cabinet approved the following proposals of Power Division with minor amendments in a couple of proposed clauses: (i) CPPA-G has been directed (as agent on behalf of DISCOs) to perform public service obligations and undertake related activities in relation to circular debt stock financing and settlement in terms of Section 7(4) read with Schedule II of the SOE Act as per the proposed terms reflected in the indicative term sheet (Annex-VII) to be executed by CPPA-G for and on behalf of DISCOs and execute 'CD Restructuring, Settlement and Subscription Agreement (CDRSSA)' between the Government of Pakistan, DISCOs and CPPA-G;(ii) Authorized the Ministry of Energy (Power Division) to execute relevant documents as may be required on behalf of the Government of Pakistan per the terms and conditions reflected in the indicative term sheet and to execute the Agreement;(iii) authorized the Ministry of Energy (Power Division) to direct DISCOs to execute relevant instruments and create such security as may be required for the purposes of the financing reflected in the indicative term sheet;(iv) approve the draft amendment in Section 31(8) of the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997 and the draft legislation be made part of the Finance Bill 2025-26;(v) approved immediate release to CPPA-G and utilization of Rs. 267 billion, already budgeted and available in power division demand no 33 under the head of GoP investment in DISCOs equity. Rs. 267 billion would be reduced to the extent of the K-Electric TDS utilization; (vi) approve technical supplementary grant of Rs. 393 billion from finance division demand no. 45 to power division demand no. 33 to be immediately released to CPPA-G under the head of GoP investment in DISCOs equity; (vii) authorized CPPA-G to utilize amounts to pay off the negotiated payables of Government-owned Power Plants (GPPs). Excess amount, if any, after payment of GPPs shall be utilized for payment to Uch-I & Uch-II for onward payment to OGDCL; (viii) authorized CPPA-G to utilize part of the proceeds raised under the aforementioned term sheet to settle and retire the outstanding debt obligations of Rs. 683.253 billion of PHL; (ix) authorized CPPA-G to disburse payments to the respective IPPs from the bank financing subject to waive Late Payment Interest (LPI) by the IPPs; (x) approve the draft amendments in Section 3(3) of the Sales Tax Act, 1990 and Section 113(3)(a) of the Income Tax Ordinance, 2001 and the draft legislation be made part of the Finance Bill 2025-26; (xi) the Term Sheet being negotiated is substantially lower than the banking sector benchmark/interbank profit rates, and to approve the exemption from the bidding under PPRA Rules; and (xii) approve the amendment in Rule-5 of the 'Pakistan Energy Sukuk Rules, 2019' as follows '5-Redemption. - The Sukuk shall be redeemable before maturity'.
On June 18, 2025, the cabinet further directed that the amendments proposed in the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997 in the summary shall be further amended as presented during the Cabinet meeting, and will be made part of the Finance Bill, 2025 after legal vetting by the Law and Justice Division.
The amendments proposed in the statutes will be made part of the Finance Bill, 2025 after legal vetting by the Law and Justice Division and amendments proposed in the rules about term sheets will be vetted from the legal point of view by the Law and Justice Division.
Copyright Business Recorder, 2025
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Recorder
12 hours ago
- Business Recorder
HCSTSI team participates in ‘Financing Agreement Signing' ceremony
HYDERABAD: A high-level delegation of Hyderabad Chamber of Small Traders & Small Industry (HCSTSI) participated in the 'Financing Agreement Signing Ceremony' and the event organized in connection with the Global Micro, Small and Medium Enterprises Day (MSMEs Day). The delegation was led by Acting President Ahmed Idrees Chohan, who was invited as the Chief Guest at the prestigious event. The program was organized by the Sindh Agricultural and Forestry Workers Coordinating Organization (SAFWCO) under the Growth for Rural Advancement and Sustainable Progress (GRASP) project, aimed at supporting and financing MSMEs. On this occasion, selected SMEs were awarded grants of Rs. 10 million and Rs. 20 million. While addressing the ceremony, Ahmed Idrees Chohan highlighted that the Global MSMEs Day, observed annually on June 27 under the United Nations, serves as a reminder that small and medium enterprises are the backbone of any economy. In a developing country like Pakistan, MSMEs are key drivers of employment, innovation and economic sustainability. He appreciated the efforts of SAFWCO, GRASP, European Union (EU), International Trade Centre (ITC), Pakistan Poverty Alleviation Fund (PPAF) and other partner institutions for making financial support for SMEs a reality and celebrating the day with full spirit. Copyright Business Recorder, 2025
Business Recorder
14 hours ago
- Business Recorder
The cost of irrational energy levies
The federal government's decision to impose a petroleum levy of Rs 77 per litre on furnace oil (HFO), supplemented by a carbon tax of Rs 2.50 per litre, adds Rs 84,742 per ton in taxes to a fuel that otherwise costs approximately Rs 130,000 per ton. For export-oriented textile manufacturers, many of whom depend on HFO-based captive power for uninterrupted production, this will severely undermine their viability. Under current market conditions, HFO-fired captive generation costs roughly Rs 33 per kWh, broadly equivalent to prevailing grid tariffs. Once the new levies are applied, generation costs surge to nearly Rs 51 per kWh, by over 50%. At this level, HFO-based power generation ceases to be economically viable, forcing textile firms into an untenable dilemma: continue operating at a severe loss or switch to an unreliable and, ultimately, more expensive grid supply. For most mills, switching to grid-supplied power is not a viable alternative, as HFO-fired captive generation is principally used by units lacking reliable DISCO connections. Across Pakistan—and particularly in urban industrial hubs such as Lahore and Karachi—DISCOs routinely decline new industrial hookups due to constrained infrastructure and transformer capacity. Where connections are technically offered, firms are presented with demand notices running into the tens of billions of rupees merely to secure a feeder line, with no guarantee of timely service: lead times for actual energization often extend to two or three years. Under these conditions, pursuing a formal grid connection is neither commercially nor operationally feasible, aside from enduring the frequent voltage sags and load-shedding that characterize grid supply. This punitive taxation of HFO follows the so-called 'grid transition levy' on gas consumption by captive-power users—a tax that the government itself concedes is incorrectly calculated yet refuses to rectify. Officially, the transition levy is intended to align the cost of captive power with grid tariffs. In practice, however, the levy calculation is based on peak-hour grid rates that apply for only four hours each day, it relies on an eight-year-old Nepra determination of captive O&M costs, a figure that has since doubled or tripled due to inflation and currency depreciation, and incorporates a series of arbitrary errors that artificially inflate the final rate, coercing efficient captive generators onto an unprepared grid. Over the past month alone, two major textile production units served by HESCO reported repeated outages, voltage fluctuations, and sudden trippings. These disturbances burned out feeders and control panels, inflicted heavy machinery damage, and disrupted tightly scheduled production lines. Similar incidents are occurring across multiple DISCOs, underscoring that Pakistan's electricity grid lacks both the capacity and reliability to absorb additional industrial loads. Rather than addressing these structural weaknesses through targeted grid investments, modernization of aging infrastructure, and expansion of generation capacity, the government has opted for a shortcut: tax all alternative energy sources until the grid becomes the sole available option. First gas, now HFO and even solar panels. On one hand, political rhetoric extols market-driven strategy and competitive pricing; on the other, regressive taxes are being wielded to coerce industrial users onto a system that is demonstrably incapable of meeting their needs. The economic repercussions extend far beyond individual factory bills. Pakistan's textile industry accounts for over 50% of export revenues, sustains millions of direct and indirect jobs, and underpins rural livelihoods through cotton cultivation. A unilateral surge in energy costs will erode global competitiveness, and potentially trigger plant closures or relocation of production to more stable energy markets. Already, the poorly designed levy on gas-fired captive generation has slashed captive gas demand by 90%, creating a 400 MMCFD RLNG surplus that the government cannot absorb and which worsens circular debt. The same error is now being applied to furnace oil—despite domestic oversupply, demand will collapse once the levy is imposed, forcing HFO to be exported at under Rs 100,000 per ton rather than sold locally at Rs 130,000. As a result, industry will rely on a grid powered largely by imported coal and RLNG, while domestic HFO is sold abroad at a loss. With demand destroyed, the levy will generate no revenue, import costs will rise, and domestic value addition in exports—through the use of local fuels—will decline. To reverse this trajectory, the government must take three immediate steps. First, suspend the new petroleum and carbon levies on HFO until a comprehensive impact assessment is completed, involving industry stakeholders, DISCO representatives, and energy experts. Such an assessment should quantify the cost differential between captive and grid power under current conditions, and model the long-term effects on export revenue, employment, and foreign exchange earnings. And even then, any levy should be imposed gradually to allow sufficient time for consumers to adjust. Second, the calculation of the grid transition levy must be corrected to reflect actual grid power tariffs and captive generation costs and eliminate arbitrary inflation. Finally, commit to a multi-year grid-modernization plan that addresses transmission bottlenecks, reduces line losses, and provides reliable power at a regionally competitive rate of 9 cents per kWh or below. Without these corrective actions, the government risks imposing a de facto production tax on Pakistan's most vital export sector—one that it can ill afford. Coercive levies may fill the treasury in the short term, but they undermine industrial resilience, drive up unemployment, and weaken foreign-exchange reserves through the hollowing-out of export capacity. In effect, policy is being used not to bolster markets, but to strangle them—and in the process, torpedo the very growth narrative that it purports to champion. A reversal of these levies, accompanied by a clear roadmap for grid improvement, will restore confidence among exporters, stabilize power costs, and ensure that Pakistan's textile sector remains a global competitor rather than a declining casualty of misguided energy policy. Copyright Business Recorder, 2025
Business Recorder
14 hours ago
- Business Recorder
Letters sent to ministers: APTMA for revising grid connection charges, suspending FO levies
ISLAMABAD: All Pakistan Textile Mills Association (Aptma) has sought rationalization of grid connection charges, reduction in grid connection time and suspension of petroleum and carbon levies on Furnace Oil (FO). In letters to Power Minister Sardar Awais Leghari, Petroleum Minister Ali Pervaiz Malik and Director General Textile (Commerce Ministry), Chairman APTMA, Kamran Arshad stated that the government has adopted policies to transition industrial captive generation loads to grid electricity. However, the punitive levies imposed have rendered industrial operations financially unviable without offering a viable transition pathway to grid-based power. Ready to help build robust framework: APTMA questions Nepra's tariff-setting capacity Aptma maintains that the imposition of a Rs. 791/Mmbtu levy on gas used for captive power generation has made it entirely cost-prohibitive. While intended to encourage migration to the electricity grid, the reality on ground is that many industrial units still lack grid connections and, in response, have been compelled to switch to furnace oil (FO)-based captive generation. The Association stated that the imposition of a petroleum levy of Rs. 82,000/ton on FO-on top of the base price of approximately Rs. 130,000/ton—has now left these industries with no economically viable power source. Aptma has cited the example of Soorty Enterprises, a major textile and apparel manufacturer with $400 million in annual exports, employing 35,000 people across different divisions. Soorty has two mills, one in Landhi under KE and another on the Super Highway under HESCO, with a total power requirement of 35MW. Following the grid transition levy on gas, both shifted from gas to FO-fired captive generation that costs around Rs. 33/kWh, compared to around Rs. 29-30/kWh on the grid and will shoot up to Rs. 51/kWh following the levies on FO. The company prefers to run its operations on the electricity grid under KE and HESCO, as it is cheaper than FO-fired captive generation even before the levy. However, KE and HESCO have quoted a cost of Rs 8 billion each to provide grid connections to these units, totalling Rs 16 billion to be paid up front. Additionally, they have been told that it would take about 3 years to connect them to the grid, with no guarantee of timely completion or energisation. On top of this, the company would be responsible for getting approvals from several government departments (like FWO, railways, local authorities, etc.), which adds further costs and difficulties. This situation is wholly untenable. The company cannot rely on gas or FO-fired generation for 3 years with the punitive levies as it will go out of business. However, paying Rs. 16 billion upfront for a grid connection with no guarantee of timely access will also push the company towards bankruptcy. It is at a dead end, with no viable options. 'While we have highlighted the example of only one company, and that too one of the biggest exporters of Pakistan, the same issues are being faced by several of our members, particularly in urban hubs like Lahore and Karachi where issues related to right of way and land availability are prevalent,' Aptma Chief said adding that no company can afford to pay billions of rupees for a grid connection, especially without any guarantee of timely completion. On the one hand, the industry is being penalized for using alternate fuels such as gas and FO and on the other hand, it is effectively barred from accessing the grid due to prohibitively high connection charges, excessive lead times, and bureaucratic delays. It is neither reasonable nor practical for the Government to mandate grid transition while the distribution companies impose insurmountable barriers to achieving it. Considering the foregoing, Aptma recommended the following: (i) Grid connection charges for export-oriented industrial units be rationalized and brought within a financially viable range;(ii) Grid connections be completed and fully energized within a maximum period of six months from fulfillment of demand notes; and (iii) all levies on industrial captive generation -including petroleum and carbon levies on FO-be suspended until all industrial units relying on gas/FO as primary sources of energy are provided affordable and operational grid connections. Copyright Business Recorder, 2025
