Rs 65 billion interest-free loan paid to Pepco: Cabinet to give ex post facto approval today

The Cabinet, which is scheduled to meet on Wednesday under the chairmanship of Prime Minister Yousaf Raza Gilani will to give ex post facto approval to already made payment of Rs 65 billion, to Pakistan Electric Power Company (Pepco), on the directive of the Prime Minister.
This proposal was on the agenda of the cabinet scheduled for June 26, 2011, but did not come under consideration due to other important agenda items. Official documents show that the Ministry of Water and Power, under the guidance of Deputy Chairman of Planning Commission, Dr Nadeem-ul-Haq, is in the process of finalising power sector reforms package to empower the discos and NTDC and outlining measures for ensuring efficiency in fuel use, transparent financial management, and improved governance. The prime focus of the reform package is settlement of the dues on account of unpaid tariff differential of the past year.
The Ministry of Water and Power had requested that, pending finalisation of the package, the government of Pakistan might extend a temporary loan of Rs 30 billion to Pepco, so that some of its pressing payments to power and fuel supplier companies could be made to ensure uninterrupted power supply in the country. The Ministry of Finance, accordingly, released Rs 30 billion as interest-free loan to Pepco through supplementary grant in November, 2010.
However, due to urgency in the matter, prior approval of the Cabinet for the supplementary grant, as required under Finance Division DO letter No 7(2)Exp-IV/2010 of July 22, 2010, could not be obtained. A summary for Cabinet, seeking ex post facto approval for the supplementary grant was submitted. The Cabinet, on December 15, 2010, considered the summary and decided as follows: (i) The Cabinet considered the summary of December 3, 2010, submitted by Finance Division on request for release of Rs 30 billion loan to Pepco and, on the request of the sponsoring Division, allowed the Finance Division to revise the summary and place it in the next meeting of the Cabinet.
According to sources, the Cabinet also approved that only to the extent of the energy sector the Prime Minister may approve the expenditure proposals, only in inevitable cases, subject to subsequent concurrence of the Cabinet. The Prime Minister, during a briefing by the Ministry of Water and Power on matters relating to Pepco as well as likely reduction in hydel generation because of canal closure and corresponding required increase in thermal generation on December 14, 2010, directed the Ministry of Finance to immediately sit with M/water and Power and to finalise financial arrangements for the assured supply of furnace oil to Pepco.
In compliance with this direction, the Ministry of Finance, after ascertaining the requirements, agreed and accordingly released further amount of Rs 30 billion in December, 2010 and Rs 5 billion on January 6, 2011 as interest-free loans for a period of two years to Pepco through supplementary grants. The amount of loan was subsequently converted into regular inter-discos tariff differential subsidy, being maintained by the Ministry of Water and Power. Ex post facto approval of the Prime Minister in terms of Cabinet decision of December 15, 2010 to the supplementary grants for an expenditure of Rs 65 billion (Rs 30 billion + Rs 30 billion + Rs 5 billion) already incurred as interest-free loan to Pepco for a period of two years for its urgent need, from demand No 130 (other loans and advances by federal government) in November and December, 2010 and January, 2011 has been accorded. On the advice of Cabinet Division, the matter was also taken up with Inter Provincial Co-ordination (IPC) Division, which advised that in accordance with Article 154 (i) of the Constitution, Pepco is a related institution over which apart from formulation and regulation policy, the Council of Common Interests (CCI) shall exercise supervision and control.
The IPC Division further advised that the Cabinet may be asked for ex post facto approval in the instant case and CCI be informed accordingly. Sources said that ex post facto approval/concurrence of the Cabinet in terms of Cabinet decision of December 15, 2010 for the supplementary grants of an expenditure of Rs 65 billion (Rs 30 billion + Rs 30 billion n + Rs 5 billion ), already incurred/released as interest free-loan to Pepco for a period of two years for its urgent need, from demand No 130 (other loans and advances by federal government) in November and December, 2010 and January, 2011 has been solicited.