The government is trying to persuade Chinese Independent Power Producers operating under the China Pakistan Economic Corridor to sign revised settlement agreements similar to those already concluded with other IPPs in order to unlock the remaining amount from a Rs. 1.225 trillion circular debt facility arranged through commercial banks.
According to a report by Business Recorder, the National Energy Task Force led by Power Minister Sardar Awais Ahmed Khan Leghari has finalized a proposed mechanism for negotiations with Chinese IPPs.
The Central Power Purchasing Agency currently owes more than Rs. 560 billion, nearly $2 billion, to Chinese power projects, with outstanding dues increasing significantly over the past year.
Officials said Chinese IPPs are being encouraged to avail the government’s circular debt reduction facility, but payments remain stalled because the projects have so far resisted signing renegotiated agreements or offering discounts on outstanding receivables.
The federal government had secured a Rs. 1.225 trillion loan from 18 commercial banks as part of efforts to reduce Pakistan’s mounting circular debt, which currently stands near Rs. 1.8 trillion in the power sector alone.
However, a significant portion of the financing remains undisbursed because Chinese CPEC based power projects have not yet agreed to revised settlement conditions approved by the federal cabinet. Sources said the government had earlier released around Rs. 100 billion to nearly 16 Chinese power projects before Prime Minister Shehbaz Sharif’s visit to China in 2025, but authorities are now reluctant to continue ad hoc payments without broader restructuring agreements.
Chinese IPPs are reportedly raising the payment issue through multiple forums, including the CPEC Secretariat, while investors have expressed growing concern over delayed returns and mounting receivables.
Port Qasim Electric Power Company has also warned the government that rising unpaid dues could eventually entitle the company to suspend operations under provisions of its Power Purchase Agreement.