Pakistan: Circular debt hits CPEC power projects

Islamabad [Pakistan], May 9 : Pakistan's flagship CPEC power projects are hit by the circular debt and the Imran Khan government has failed to clear PKR 188 billion due payments in breach of an energy framework agreement with China, The Express Tribune reports.
"Pakistan has so far paid PKR 832 billion on account of the power purchase price to the Chinese independent power producers (IPPs)," Special Assistant on Energy Tabish Gohar told Tribune. The Central Power Purchase Agency Guaranteed (CPPA-G) could not clear PKR 188 billion worth dues, Gohar added.
The circular debt, which was PKR 1.15 trillion in June 2018, has reached PKR 2.6 trillion as the Pakistan government is busy forming a strategy to reduce this debt to the 2018 level in the next two years.
Meanwhile, Pakistan's Ministry of Energy has submitted a comprehensive circular debt management plan to a cabinet, recommending to clear PKR 435 billion worth principal loan of power plants under CPEC in the next 13 years instead of making immediate payments.
Aside from this, Islamabad is set to seek debt restructuring of USD 3 billion for the CPEC energy projects and requests China to consider restructuring of the repayments for 10 to 12 years in a bid to eliminate the need for increasing power tariff in the country.
This is part of the Imran Khan government's proposals to minimize tariff increase requirements under a recently approved debt management plan.
"The country is scheduled to make PKR 435 billion or nearly USD 3 billion principal repayments to 12 Chinese independent power producers in three years," Gohar told The Express Tribune earlier this week.
"The government will request China to consider restructuring of the USD 3 billion repayments for 10 to 12 years, which in return will reduce the tariff increase requirements by PRK 1.50 per unit."
According to Pakistani daily, China has set up two dozen power plants under the CPEC and the repayments of the Chinese debt are included in the electricity tariffs.