The Finance Ministry has introduced a new system of subsidy payment to power distribution companies (Discos) in accordance with the Standard Operating Procedure (SOP) prepared in consultation with the World Bank (WB), sources told Business Recorder.
According to new rules for sale and purchase of electricity, tariff subsidy would initially be paid to three discos, whereas other companies would remain dependent on Wapda. "Tariff subsidy will initially be paid to Hesco, Fesco and Mepco, from October, but there would be no change in the system for other entities," sources said.
For getting the subsidy, Discos would submit invoices, duly signed by their respective committees and countersigned by CEO or their authorised representative, to the Ministry of Water and Power not later than 5th of each month. Sources said that the Ministry of Water and Power would verify, countersign the invoices, and submit them to Finance Ministry by 10th of each month.
Finance Ministry would process the invoices, issue sanctions, duly endorsed by Financial Advisor's Organisation, and submit bills to AGPR, Islamabad, which would issue payment advice to State Bank of Pakistan for transfer of funds from federal government account No-1 to the Escrow Account by 25th of each month, sources said.
The government would also extend credit line, or overdraft, for needy Discos to meet cash shortfall, in case of emergencies, with the condition that their heads and board of directors would be held responsible for any wrongdoing.
Ministry of Water and Power, Pepco and Discos would negotiate terms and conditions of Escrow Account, whereas Additional Director General, Debt, would facilitate negotiations for loans from banks.
"Water and Power Ministry will scrutinise and forward Discos proposals for credit ceiling of Escrow Account. Finance Ministry will fix the ceiling on case-to-case basis but will not provide any guarantee," sources added. However, it would be mandatory for the Water and Power Ministry to ensure that the Discos are able to repay the advances overdrawn from the Escrow Accounts and do not default on their obligations.
Sources said that Ministry of Water and Power would make arrangements for uninterrupted flow of money, to the power sector companies, for sale and purchase of power.
"Finance Ministry will arrange a credit line, or overdraft, with appropriate ceiling for each of the needy Discos which will enable them to meet their cash shortfall in cases of emergencies," they said, adding that the shortfall due to failure in meeting performance targets would be strictly monitored by Finance Ministry.
The Escrow Account would be used to ensure full payment to Central Power Purchase Agency (CPPA). The escrow accounts would receive all revenues of Discos and make payments on monthly basis to CPPA on account of power received by them on submission of prescribed documents for payment. The CPPA would then make payment to generation companies (gencos) and National Transmission and Dispatch Company (NTDC) as per their invoices, after due process.
Escrow Account would also be used to avoid any hold-up, delinquency or shortfall in flow of money from one company to the other which may result in cascade of defaults as the CPPA may consequently default to gencos and IPPs.
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