The Economic Coordination Committee on Friday has approved the financial setoff mechanism for the government-owned Independent Power Producers (IPPs), said Minister for Energy Hammad Azhar.

Azhar, in a tweet post on Friday, said that the “ECC has today approved the financial setoff mechanism for government-owned IPPs".

"This means that the receivables and payables between government entities have been balanced against each other. This will lead to a reduction of Rs 116 BN in the circular debt stock," the tweet post added.

Rising circular debt is one of the biggest impediments in the way of the country’s economic growth, say experts. In 2020-21, the government added Rs498 billion to circular debt due to lower budgeted subsidies, and increased cost of inefficiencies. The accumulated circular debt was Rs 2.732 trillion in 2020-21 as the government claimed that it added only Rs 177 billion in circular debt.

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On Thursday, the Cabinet Committee on Energy (CCoE) approved a summary on Examination, Validation of Process of IPPs Agreement submitted by the Power Division.

The Power Division submitted a summary on Examination, Validation of Process of IPPs Agreement, and the committee, after detailed discussion, approved the proposal that the agreements with 2002 IPPs finalised by the Implementation Committee be reviewed in the light of the National Accountability Bureau (NAB) advice in the M/s Nishat Chunian Power Ltd case.