Rs930b Islamic funds curb debt

CPPA-G seeks regulator's nod to file multi-year tariff petition next year

ISLAMABAD:

The federal government has managed to execute an Islamic financing transaction of Rs930 billion to reduce the growing circular debt in the power sector.

At a public hearing held on Tuesday, the officials of Central Power Purchasing Agency-Guarantee (CPPA-G) made the revelation about the Shariah-compliant financing to curb the debt.

CPPA-G requested the power-sector regulator – the National Electric Power Regulatory Authority (Nepra) – to allow the company to file a Multi-Year Tariff (MYT) petition in the next financial year instead of requiring it to submit the application immediately.

The company pointed out that it had successfully executed Pakistan's largest-ever Islamic financing transaction of Rs930 billion and made settlements, providing critical support for the government's circular debt reduction objectives.

In recognition of the CPPA-G contribution to the circular debt financing initiative, the government of Pakistan conferred Sitara-e-Imtiaz on the company's chief executive officer (CEO) and another official.

The company also informed the public hearing about the initiatives that resulted in a relief of Rs183.4 billion for end-consumers. It cited savings of Rs184.53 billion through the implementation of amended/negotiated settlement agreements, led by a task force, which benefitted consumers through tariff adjustments. It highlighted that the power sector achieved financial stability following the realisation of Rs795 billion in subsidies.

In the petition, the company mentioned that through power purchase agreements, it secured tariff rationalisation and consumer savings via strategic negotiations with wind, solar and nuclear power producers, leading to tariff reductions and a late payment surcharge waiver.

It was pointed out that portfolio scale management and commercial invoicing encompassed 39,936 megawatts of production capacity under 112 active power purchase agreements and energy purchase agreements. During financial year 2025-26, power purchase invoices exceeding Rs3 trillion were processed. "This section provides response to the issues framed by the regulatory authority."

A question was raised regarding whether the grounds provided by CPPA-G for exemption from filing the MYT petition for the subsequent financial year and acceptance of the single-year tariff petition for the current year were justified?

In response, the CPPA-G officials told the public hearing that the company's board had directed the management to undertake a comprehensive exercise based on realistic assumptions, ground realities and future operational and capital expenditure requirements to ensure that the tariff petition accurately reflected the company's legitimate needs and sustainable financial requirements. "Accordingly, the management is diligently working on the directives and expects to complete the necessary assessment for filing the multi-year tariff petition from the next financial year, ie, 2027-28," they said.

In view of the foregoing, the CPPA-G requested the power-sector regulator to allow the company to file the MYT petition in the next financial year instead of requiring it to submit the application immediately, so that a comprehensive, well-founded and realistic petition may be forwarded for consideration of the regulatory authority.

The hearing was further informed that the general establishment cost for financial year 2025-26 was Rs2,524 million, comprising Rs1,627 million for pay and allowances, Rs349 million for employee benefits (provident fund, gratuity, Employees Old-Age Benefits Institution, group life insurance, medical facilities and bonus), Rs199 million for bonus based on the board of directors' approval, Rs32 million for training and capacity building, Rs19 million for consultancy services and Rs298 million for new hiring costs including benefits.

For current financial year 2026-27, the company has requested for expenditures amounting to Rs2,504 million, including Rs1,792 million for pay and allowances, Rs391 million for employee benefits, Rs106 million for bonus, Rs25 million for training and capacity building, Rs15 million for consultancy services and Rs175 million for new hiring costs including benefits. The total establishment cost, including new hiring, is therefore projected to drop by Rs20 million compared with FY2025-26. During the hearing, a question was also raised about the new appointments CPPA-G had made.