Ministry of Water and Power is to arrange Rs 25 billion from commercial banks to inject into the power system immediately which will be made part of tariff at an appropriate time, well-informed sources in Finance Ministry told Business Recorder. The proposal has been approved by the Economic Co-ordination Committee (ECC) of the Cabinet presided over by Finance Minister Senator Ishaq Dar.
According to sources, power Distribution Companies(Discos) are facing financial constraints in payment of long-outstanding power dues to Central Power Purchasing Agency (CPPA) mainly due to high distribution losses, arrears of subsidy amounts, low revenue collection and lower applicable tariff, which do not fully cover the cost of services delivered. The sources said during 2015, recoveries have increased from 88.6% to 93.4% (all time high) and the T&D losses have reduced from 19.1% to 18.0% (all time low). Payments to Generation Companies (Gencos )/IPPs are made out of revenues generated by the Discos from the consumers out of collections and various subsidies from Ministry of Finance, for the set of consumers as decided/announced by the Federal Government from time to time.
Power sector dues on account of various subsidies, current and accrued, totalled about Rs 168 billion, details of which are as follows: (i) Peshawar Electric Supply Company (Pesco) Rs 33.082 billion; (ii) Discos (others) Rs 7.196 billion; (iii) K-Electric Rs 15.21 billion; (iv) FATA Rs 14.868 billion; (v) AJK unpaid/ verified claims of subsidy till February 2016, Rs 63.893 billion; (vi) KE subsidy invoices received in 2015-16- unpaid, Rs 22.05 billion; (vii) Discos' current pending claims Rs 9.45 billion; and (viii) FATA current pending claims Rs 2.6 billion.
The sources further stated that the Ministry of Water and Power and Ministry of Finance are working on a settlement plan for power sector liabilities. The sources also maintained that a financing facility is proposed to be arranged for immediate liquidity injection into the sector. The proposed loan will be arranged on behalf of power distribution companies by Power Holding (Pvt) Limited (PHPL) through STFF from a consortium of local commercial banks. Power Holding (Private) Limited will be responsible for arranging a loan amounting to Rs 25 billion for power sector companies.
Ministry of Finance will provide a government guarantee for repayment of loan as well as interest, for the facility amounting to Rs 25 billion, arranged through a consortium of local banks. The sources stated that the servicing of mark-up, principal repayments and all other amounts becoming due and payable in respect of the subject facility shall be the responsibility of Finance Division, adding that once any space is available in the tariff regime, this may be collected through revenue generation though imposition of surcharge.
Power sector payables arise from: (i) non recoveries from supply to AJ&K, other federal and provincial governments including FATA, private consumers and Balochistan tube-wells; (ii) accrued mark-up from servicing of PHCL; (iii) line losses and non-collections that are not recognised by Nepra; (iv) GST non-refund; (iv) late payment surcharges; and (v) delay in tariff determinations.
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