The Economic Coordination Committee (ECC) has approved a comprehensive inter-corporate circular debt settlement plan aimed at improving the financial health of Pakistan’s energy sector. The decision includes tariff rationalisation for all six operational nuclear power plants and clears the path for the closure of Power Holding Limited (PHL) — a company originally established to manage legacy circular debt.
Chaired by Finance Minister Muhammad Aurangzeb, the ECC also sanctioned approximately Rs960 billion in sovereign guarantees for Rs1.225 trillion in loans from local banks to finance this debt settlement initiative.
Rationalisation of Tariffs and Settlement with Nuclear Power Plants
As part of the approved summary from the Power Division, the ECC endorsed tariff rationalisation and payment adjustments for nuclear power plants (NPPs), government-owned power producers (GPPs), and entities like OGDCL and SNGPL.
The committee also authorised the Central Power Purchasing Agency (CPPA) to execute negotiated settlement agreements with the Pakistan Atomic Energy Commission (PAEC), covering six key nuclear plants — four at Chashma (C1–C4) and two at Karachi (K2 and K3) — with a combined generation capacity of around 3,500 megawatts.
Under this arrangement, the federal government will assume specific financial obligations, including foreign supplier credits and high-interest cash development loans. The ECC directed the PAEC to submit separate tariff petitions for these nuclear plants based on the agreed financial adjustments.
Settlement of Power Sector Liabilities
The ECC authorised CPPA to clear the outstanding liabilities of government-owned power producers from the newly arranged Rs1.225 trillion circular debt financing facility. The committee approved the repayment of Rs23.6 billion in PHL loans and granted a waiver of Rs119.5 billion in late payment interest on LNG-based GPPs at Bhikki, Balloki, and Haveli Bahadur Shah.
Additionally, the ECC allowed payments to OGDCL through receipts from the Uch power plants, ensuring financial settlement of overdue dues.
Policy Guidelines for Gas and LNG Tariff Adjustments
The committee approved new policy guidelines for the Oil and Gas Regulatory Authority (OGRA) under Section 21 of the OGRA Ordinance. This decision enables the inclusion of Rs22 billion in LNG supply costs within the consumer tariff after verification by auditors.
The move is designed to enhance the financial sustainability of the gas sector, streamline payments, and ensure greater transparency in pricing.
Sovereign Guarantee for Circular Debt Financing
The ECC also approved a sovereign guarantee worth Rs659.67 billion for the Rs1.225 trillion debt settlement. This guarantee aims to facilitate the resolution of Power Holding Limited’s obligations and clear dues owed to independent power producers.
To further strengthen investor confidence, the Finance Division has been authorised to issue a letter of comfort, assuring stakeholders of the government’s commitment to fulfilling financial responsibilities. The Power Division was instructed to provide a detailed timeline for the closure of Power Holding Limited following the debt settlement.
Gradual Phase-Out of Remittance Incentives
The ECC decided to gradually phase out incentives offered to banks and exchange companies for facilitating home remittances. However, the committee noted that this phase-out must be timed carefully to avoid disruptions in foreign inflows, as cautioned by the State Bank of Pakistan.
Support for Fertiliser and Agricultural Research
The committee approved the allocation of 220 million cubic feet of gas from the Ghazij and Shawal fields to fertiliser plants to maintain stable and affordable fertiliser supplies. The decision includes reallocating gas from older, decommissioned plants and adjusting prices from the Mari gas field.
In another decision, the ECC allowed the reallocation of funds within the Ministry of National Food Security and Research to support ongoing agricultural research through a technical supplementary grant.
Other Key Approvals
The ECC approved Rs960 million for the Ministry of Interior to cover staff payments for the Pakistan Public Works Department for the period between October 2025 and June 2026.
A summary from the Ministry of Maritime Affairs on utilising the Pakistan International Bulk Terminal at Port Qasim for exporting mineral commodities was deferred. The committee directed that a clearer framework be developed after further consultation with stakeholders.
The ECC’s approval of the circular debt settlement plan marks a crucial step toward financial restructuring and transparency in Pakistan’s energy sector. With the closure of Power Holding Limited and rationalisation of power tariffs, the government aims to reduce long-term fiscal burdens, stabilise energy finances, and strengthen investor confidence in the power industry.
