Power consumers of Pakistan would have to pay around Rs 21 billion annually as a result of the government's recently approved debt swap of Rs 160 billion to ease the circular debt.
According to official documents the government will take over Rs 160 billion power sector loans and sell them to a consortium of commercial banks in the form of a five year term finance certificates (TFCs) to be issued by the Pakistan Power Holding Company, a government subsidiary, against independent guarantees of the federal government. The banks will charge about 12.6 % interest on the loans.
The debt swap will partially dissolve a Rs 404 billion circular debt which Wapda has to pay to the IPPs and fuel suppliers. The division of Rs 404 billion payables is as follows: Rs 239 billion is electricity price, Rs 115 billion capacity charges of IPPs and Rs 49 billion interest cost. At present total circular debt of Pakistan State Oil (PSO) has surged to Rs 371.3 billion of which Rs 193.126 billions are receivables and Rs 178.117 billion payables to international fuel suppliers and local refineries.
Power sector is the leading defaulter of the PSO with Rs 173.4 billion outstanding dues against it, while Oil and Gas Development Company (OGDCL), Pakistan international Airlines (PIA) National logistic Cell (NLC) and Pakistan Railways (PR) also owes billions of rupees to PSO. The national fuel supplying company owes Rs 84.6 billions to Kuwait Petroleum Company limited (KPC) on account of letter of credit payments and Rs 93.5 billion to local refineries.
Dr Salman Shah, former caretaker Finance Minister of Pakistan while talking to Business Recorder said that the government is adopting short-term plans in dealing with the energy crisis. He said that calculating at current interest rate of around 12.6 percent Pakistan's domestic debt would increase by Rs 21 billion annually as a consequence of the debt swap agreement.
According to federal budget 2011-12 Pakistan's total interest payments on internal and external debt stand at Rs 790,977 billion out of which Rs 714,671 is on domestic debt and Rs 76,306 foreign debt. Shah added that once the debt swap deal is finalised interest payments would amount to Rs 21 billion on TFCs (Terms Finance Certificates) which in turn would be passed on to electricity consumers in the form of higher tariffs.
The government has to take long-term measures to deal with the serious energy crisis and the only available option is to increase the thermal-power generation to the maximum possible to erase the crippling electricity load shedding, Dr Shah added. According to documents pertaining to the Economic Co-Ordination Committee of the Cabinet (ECC) available with this correspondent "the distribution companies will claim the financing cost of this loan in their tariff so that the same could be recovered from the end consumers.
The National Electric Power Regulatory Authority (NEPRA) will be given necessary policy guidelines by the Ministry of Water and Power in this regard". The documents further reveal that the committee decided that a part of the earnings from increased power tariff should be placed in a special account to enable distribution companies to pay interest to banks against the revenue insurance.
Comments
Comments are closed.