CPEC IPPs: Finance Division asks PD to adjust Rs20.726bn as advance payment

ISLAMABAD: The Finance Division has asked the Power Division to adjust Rs 20.726 billion as advance payment to CPEC IPPs against next five months of current financial year (2023-24) as decided by the federal government, official sources told Business Recorder.

Citing the Power Division’s letter of June 22, 2023 on implementation of Revised Circular Debt Management (CDMP), the Finance Division has stated that funds of Rs 2.726 billion were surrendered in favour of Power Division in June 2023.

Regarding concurrence for utilization of remaining Rs 20.726 billion as advance payment from Pakistan Energy Revolving Account (PERA), Finance Division has once again advised that Power Division may adjust the advance payments to CPEC-IPPs against next five months of FY 2023-24.

Rs300bn dues of CPEC IPPs likely to be cleared next month

However, monthly payment to CPEC-IPPs shall be shared on the prescribed format with Finance Division accordingly.

On June 21, 2023, Power Division briefed the ECC that considering the unprecedented accumulation of circular debt and cash flow constraints, the Federal Cabinet in a meeting on February 14, 2023, approved the Revised Circular Debt Management Plan for power sector, which encompassed budget of Rs905 billion to manage the critical cash flow requirements and to curtail the CD flow to minimum possible level. This included Rs180 billion earmarked in the budgetary allocation for IPPs stock payments.

The ECC on a summary of October 31, 2022 approved opening of Pakistan Energy Revolving Account (PERA) at State Bank of Pakistan with Rs50 billion allocation to be utilized during CFY-23. CPPA-G was allowed to withdraw to a maximum of Rs4 billion per month and receive Rs.32 billion till Jun-23 whereas Rs18 billion would remain unutilized in assignment account.

Similarly, after the stock settlement of Uch Power, an amount of Rs2.726 billion was available under IPPs stock clearance head.

The Power Division noted that out of Rs50 billion deposited in PERA Account, Rs32 billion were disbursed which implies a balance of Rs18 billion is still available.

An amount of Rs93.438 billion was approved for Government Power Plants (GPP), which has already been disbursed. However, Rs2.729 billion balance exists on account of IPPs as Rs33.836 billion disbursed against allocation of Rs36.562 billion.

The Power Division submitted following proposals for consideration of the ECC: (i) a technical supplementary grant of Rs2.726 billion for Assignment Account from existing budgetary allocation against Finance Division Demand No 45 under the title lump sum provision for power subsidy in favour of Power Division demand No 33; (ii) release and authorize Power Division to utilize Rs.20.726 billion (Rs 18 billion already available in assignment account plus Rs2.726 billion to be transferred through TSG) in favour of GPPs; and (iii) authorize Power Division to utilize full amount out of assignment account in relaxation of limit of using Rs4 billion per month during June 2023.

During the ensuing discussion, Finance Division highlighted that Rs18 billion had already been approved by ECC as Supplementary Grant in Feb 2023; therefore, its purpose cannot be changed. Finance Division also proposed that Rs20.726 billion may be allowed to be utilized for CPEC IPPs under Pakistan Energy Revolving Account maintained at State Bank of Pakistan, which can be drawn as advance against future monthly instalments. In order to utilize the whole amount before 30th June 2023, ECC can relax the condition of monthly drawl limit of Rs4 billion.

Secretary Power Division agreed with proposal of Finance Division for its utilization for CPEC projects as proposed by Finance Division.

After detailed discussion ECC approved the proposal with direction that amount may be utilized through assignment account titled Pakistan Energy Revolving Account for CPEC projects.

Copyright Business Recorder, 2023