CPEC: Pakistani govt approves release of Rs 4 billion for IPPs

Islamabad: Pakistani government has approved Pakistani Rs 4 billion to make payments to Independent Power Producers (IPPs) engaged in projects under the China-Pakistan Economic Corridor (CPEC) for the month of January 2024.

Earlier, the ECC had allowed the establishment of the PERA at the State Bank of Pakistan, allocating Rs 50 billion for the ongoing fiscal year. This authorization allows for monthly withdrawals of up to Rs4 billion by the Central Power Purchasing Agency-Guarantee (CPPA-G).

These measures are part of a broader strategy to manage the financial commitments of the country’s power sector. This sector witnessed a notable 10.5 percent monthly growth in financial obligations during the July-December period of 2023-24, totaling Rs 2.551 trillion.

The Finance Division of Pakistan has given authorization to the Power Division for the withdrawal of Rs 4 billion from the Pakistan Energy Revolving Account (PERA).

This allocation is specifically earmarked for making payments to IPPs engaged in projects under the CPEC, official said.

This decision stems from an Office Memorandum put forth by the Power Division on February 7, 2024. The memorandum sought approval to access funds from the PERA, aligning with a directive issued by the Economic Coordination Committee (ECC) on October 31, 2022.

During a recent official visit to China, Muhammad Ali, the caretaker Minister for Power and Petroleum, confirmed significant progress in clearing outstanding payments to Chinese IPPs.

Specifically, payments for billings from the years 2022 and 2023 have been settled at 94 percent and 95 percent, respectively. Ali assured further enhancements in payment procedures are currently in progress.

However, concerns have been raised regarding payment by the Port Qasim Electric Power Company (Private) Limited (PQEPC), one of the Chinese IPPs involved. The company has highlighted delays in payments, resulting in liquidity challenges for their operations.

As of February 26, 2024, the outstanding receivables for PQEPC have accumulated to Rs88.38 billion (approximately $316.52 million), with some payments overdue for more than six months.

PQEPC has urged immediate measures to alleviate the financial strain, pointing out ongoing negotiations to address issues related to foreign exchange availability. These unresolved matters could potentially increase the owed amount by an additional Rs 13.6 billion.