ISLAMABAD: Pakistan has decided to release over Rs100 billion to Chinese power plants ahead of Prime Minister Shehbaz Sharif’s visit to China, cutting outstanding dues by nearly one-fourth in a bid to address one of Beijing’s key concerns.
According to officials, the Finance Ministry has instructed that payments be made from the power sector subsidies allocated in the current fiscal year’s budget. An additional Rs8 billion has also been disbursed from regular allocations for the Chinese Independent Power Producers (IPPs). The payments are expected to be made within the next few days.
The move comes just days before PM Shehbaz travels to China to attend the Shanghai Cooperation Organization (SCO) Head of States meeting, where he is also expected to join an investment conference organized by Pakistan’s embassy.
Dues Situation
- As of June 2025, Chinese power producers under CPEC were owed Rs423 billion.
- After the Rs100 billion clearance, the dues will drop to a little over Rs300 billion.
- Since 2017, Pakistan has already paid Rs5.1 trillion to 18 Chinese power plants — 92.3% of the billed amount, including interest.
- Authorities argue that much of the remaining dues are late payment surcharges, not actual energy costs.
Circular Debt & Financial Stress
Pakistan is seeking nearly Rs1.3 trillion in fresh loans from local commercial banks to retire circular debt across state-owned, private, nuclear, and Chinese power plants. However, this deal has yet to be finalized.
The unpaid Rs423 billion violates the 2015 CPEC Energy Framework Agreement, which requires Pakistan to ensure timely payments. Under the agreement, Islamabad was also obligated to set up a revolving fund equal to 21% of power invoices to safeguard Chinese firms. While a Pakistan Energy Revolving Account was created in October 2022 with Rs48 billion annual allocations, restrictions on withdrawals (capped at Rs4 billion per month) led to the debt pile-up.
Power Plants Breakdown
- Sahiwal Coal Plant: Rs87 billion owed (received Rs1.14 trillion since operations).
- Hub Coal Plant: Rs69 billion owed (claims of Rs834 billion so far).
- Port Qasim Coal Plant: Rs85.5 billion owed (total bills over Rs1 trillion).
- Thar Coal Project: Rs55.5 billion owed (claims of Rs566 billion).
FPCCI Concerns
The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) recently noted that the apparent Rs800 billion reduction in circular debt this year was due to a one-time stock payment, not structural reforms.
- Rs801 billion earmarked as consumer subsidies was instead used to pay off debt, the FPCCI warned, saying this distorts public perception.
- Excluding these adjustments, circular debt actually increased by Rs379 billion in FY2024-25.
