ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet on Friday approved a comprehensive inter-corporate circular debt settlement plan, paving the way for the winding up of Power Holding Limited (PHL) — a company originally established to park legacy debt in the power sector.
Chaired by Finance Minister Muhammad Aurangzeb, the ECC also endorsed sovereign guarantees worth Rs660 billion to secure Rs1.225 trillion in commercial loans from local banks. These funds will be used to settle circular debt obligations and facilitate gas diversion for fertiliser plants.
According to a statement, the plan — finalised by a military-led task force on power sector reforms — includes tariff rationalisation for all six operational nuclear power plants (NPPs), bringing them in line with other power producers.
The ECC approved memorandums of understanding (MoUs) with the Pakistan Atomic Energy Commission (PAEC) and authorised the Central Power Purchasing Agency (CPPA) to execute negotiated settlement agreements and amend existing power purchase agreements for the Chashma (C1–C4) and Karachi (K2 and K3) nuclear plants, which have a combined capacity of about 3,500 megawatts.
Under the approved framework, the federal government will assume certain financial obligations, while the PAEC will file new tariff petitions reflecting agreed debt adjustments. The decision is expected to enhance financial discipline and sustainability in the power sector.
The ECC also authorised payments of outstanding liabilities to government-owned power plants (GPPs) through the circular debt financing facility and approved the repayment of Rs23.6 billion in PHL loans alongside a waiver of Rs119.5 billion in late-payment interest from LNG-based plants at Bhikki, Balloki, and Haveli Bahadur Shah. Additionally, overdue payments to OGDCL related to the Uch power plants will be cleared.
To ensure transparency and regulatory compliance, the committee approved policy guidelines for the Oil and Gas Regulatory Authority (OGRA) to incorporate Rs22 billion in LNG supply costs into consumer tariffs, subject to audit verification.
The Ministry of Finance said the approved measures will strengthen financial sustainability, streamline payments, and reduce overall system costs in the power sector.
Furthermore, the ECC instructed the Power Division to present a detailed timeline for PHL’s formal closure after the debt settlement process concludes.
Other decisions included phasing out incentive schemes for banks and exchange companies managing home remittances — to be done gradually to avoid disrupting inflows — and approving Rs960 million for the Ministry of Interior to meet salary obligations of transferred Public Works Department staff for FY2025–26.
The ECC also approved reallocations within the Ministry of National Food Security and Research to support agricultural R&D and deferred a Maritime Affairs summary on using Pakistan International Bulk Terminal (Port Qasim) for mineral exports, directing further stakeholder consultations before resubmission.
Additionally, the committee approved a Petroleum Division proposal to allocate 220 million cubic feet of gas from the Ghazij and Shawal fields, and to adjust pricing for Mari field gas, ensuring stable and affordable fertiliser supply to the agriculture sector.
Story by Khaleeq Kiani
