ISLAMABAD: The Economic Coordination Committee (ECC) has directed the Ministries of Petroleum and Power to urgently resolve a dispute over gas supply guarantees after K-Electric (KE) was served with notices warning of a possible gas supply disconnection due to an alleged breach of guarantees.
According to official sources, the issue was discussed during a recent ECC meeting, where Federal Minister for Petroleum Ali Pervaiz Malik informed the committee that KE had received gas disconnection notices because of guarantee-related issues. He urged the Power Division to take immediate action, prompting the ECC to ask both ministries to resolve the matter without delay.
During the meeting, the Ministry of Energy’s Power Division explained that the dispute was linked to surplus funds available under K-Electric’s tariff differential subsidy. Officials stated that KE had not cleared its electricity-related dues, contributing to an accumulation of approximately Rs200 billion in circular debt. They also noted that the utility’s tariff remains under judicial review, while the available subsidy funds need to be re-appropriated to meet sectoral cash flow requirements and help contain circular debt.
The ECC directed the Power Division to actively pursue the ongoing legal proceedings, following the relevant High Court decision, in consultation with the Ministry of Law and Justice and the Attorney General for Pakistan. The Power Division assured the committee that it would actively pursue the case during July.
The committee was further informed that Pakistan’s power sector continues to face severe financial challenges, with circular debt reaching Rs1.924 trillion as of May 31, 2026, including Rs873 billion payable to banks under circular debt financing arrangements.
Officials noted that the government had committed to the International Monetary Fund (IMF) to reduce and contain circular debt at Rs1.6 trillion by the end of June 2026.
The remaining liabilities include payments due to independent power producers (IPPs), the National Grid Company (NGC), the Pak-Matiari Lahore Transmission Company (PMLTC), and other entities. The ECC was warned that continued payment delays could strain electricity supply, increase financial pressure on power producers, and adversely affect economic growth.
The committee was also informed that delayed payments to IPPs could trigger sovereign guarantee claims and additional late-payment surcharges, as many of the payment obligations are backed by government guarantees. Immediate liquidity injections into the power sector were therefore considered essential to stabilize cash flows and support circular debt reduction targets.
Officials said the federal government had allocated Rs893 billion in power sector subsidies during the just-concluded fiscal year. Of this amount, Rs257 billion was earmarked under the Finance Division for equity payments to government-owned power plants and IPPs. While Rs105 billion had already been released, the remaining Rs152 billion was required to be transferred to the Central Power Purchasing Agency-Guarantee (CPPA-G) before the close of the fiscal year.
The Ministry of Finance informed the ECC that, given the government’s circular debt management commitments, it would be prudent to utilize available budgetary resources through re-appropriation within the Power Division.
After deliberations, the ECC partially approved the Power Division’s proposal for the release of funds, authorizing Rs54.4 billion after adjusting Rs97.5 billion, as part of efforts to improve liquidity in the power sector and support the implementation of the Circular Debt Management Plan (CDMP) 2025-26.
