The federal government has once again failed to reach a decision on the payment of Rs. 230 billion that it owes Chinese power companies operating under the China-Pakistan Economic Corridor (CPEC).
Pakistan had assured China three months ago that it would pay the Chinese power plants Rs. 230 billion ($1.4 billion) and establish a revolving fund with deposits equal to 21 percent of the cost of power generation. The most recent assurance had notably come from the 10th Joint Cooperation Committee of the CPEC.
According to Express Tribune, officials from the Ministries of Finance and Energy and the CPEC Authority had met under the chairmanship of the Adviser to the Prime Minister on Finance, Shaukat Tarin, on Monday but they were unable to reach a decision on the timetable for the settling of outstanding dues and the activation of a revolving account to clear the dues with the concerned Chinese companies.
There was also a problem with supplementing the revolving fund due to a lack of resources. In response to the Ministry of Energy’s demand at the time of the budget, the Ministry of Finance had already granted around Rs. 140 billion less in budget subsidies.
Due to technical losses, theft, and a low rate of recovery of the electricity bills, electricity recoveries remain roughly 20 percent lower than the overall power-producing costs.
China had acquired guarantees to reimburse these losses through the formation of a revolving account during the CPEC discussions. Additionally, the Chinese power producers get paid around Rs. 5 billion to Rs. 6 billion less for every month that they are billed.
In the midst of these events, the unpaid sum to the electricity producers, known as the ‘circular debt’, increased from Rs. 1.15 trillion in June 2018 to Rs. 2.4 trillion in September 2021.
The government has reportedly sought to clear some of the outstanding debts but it is yet to find a way to pay the Chinese debts. If it adopts the approach of clearing 40 percent of the outstanding dues negotiated with non-CPEC power stations, the first payment will cost close to Rs. 100 billion. However, compared to the local power producers (IPPs) that have settled their tariff woes with the government, the Chinese IPPs have refused to forego their fair benefits, and are expecting payment in full.
