The Ministry of Finance has agreed to pay a cash shortfall of Pakistan Electric Power Company (Pepco) from January 2009 onward on the instructions of Prime Minister Yousaf Raza Gilani, sources told Business Recorder. Pepco''s monthly cash shortfall is believed to be around Rs 6.2 billion, which implies that the federal government will pay Rs 31 billion till the end of the current fiscal year, sources said.
They said that Pepco''s projected cash flow statement for the current fiscal year has already been provided to Finance Ministry so that necessary arrangements could be made for release of the agreed amount of shortfall.
According to sources, Pepco is making arrangements for total Rs 228 billion, including the Term Finance Certificates (TFCs) expected to generate Rs 98 billion. This total amount would be paid to the independent power producers (IPPs), oil companies and those companies whose power sector projects have already been approved.
All major banks, including National Bank of Pakistan, Allied Bank, Muslim Commercial Bank, Standard Chartered Bank (SCB), Royal Bank of Scotland (RBS), United Bank and Habib Bank will issue TFCs on behalf of Pepco.
When contacted, Tahir Basharat Cheema, Pepco spokesman, said that the National Electric Power Regulatory Authority (Nepra) had determined Discos'' tariff on September 5, 2008, with a projected revenue of Rs 195 billion, out of which only Rs 130 billion was passed on to consumers, while Rs 65 billion was not part of the tariff.
In a meeting December in Islamabad, it was decided that the federal government would pay the current shortfall from January onward, which was partial implementation of tariff determination, he said. With regard to issuance of TFCs, another official of Pepco told Business Recorder that the Advisor to Prime Minister on Finance, Shaukat Tarin, had held a couple of meetings with the presidents of different banks for this purpose.
A follow-up meeting was held by Finance Ministry officials with senior/chief executives and investment heads of major banks and Pepco Member, Finance, on January 28, 2009 in board room of National Bank of Pakistan in Karachi to discuss progress of the financing arrangements of Rs 75 billion--part of the circular debt. The amount has now been enhanced to Rs 98 billion.
According to sources, Razi Abbas, Additional Secretary, Finance, chaired the meeting and apprised the participants that the government had established February 15, 2009 as target date for finalisation of financing structure to be proposed by banks. However, this target has not been achieved and no explanation has been forthcoming to date. Sources said the banks'' consortium had also discussed modalities and structures of conventional and Islamic financing.
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