The Finance Ministry has reportedly refused to exempt PHPL Term Finance Certificates (TFCs) - issued to settle the persistent energy sector circular debt - valued at Rs 85.114 billion from stamp duty, official sources told Business Recorder.
In a letter to the Chief Executive Officer, Power Holding Private Limited (PHPL), Fazeel Asif, the ministry has requested the company to take measures to verify the claims of banks against PHPL's TFCs of Rs 85.114 billion. Being a part of their responsibility, PHPL needs to record their specific recommendations to be processed through the Ministry of Water and Power. As for the unutilised amount of Rs 840 million, the Finance Ministry stated that PSO has a claim against PHPL, which should be settled.
Though the Finance Ministry appointed a federal adjuster as per the directives of the Cabinet - a decision in compliance with the first Letter of Intent (LoI) submitted by the government of Pakistan on November 20, 2008, the issue stays unresolved with Karachi Electric Supply Company (KESC), provinces and a couple of Discos unwilling to empower the federal adjuster to deduct their funds at source without reconciliation of bills, the sources added.
The Economic Co-ordination Committee (ECC) of the Cabinet was informed on March 30, 2010, by the Finance Ministry about the meetings of the adjuster with representatives of Sindh government and the subsequent stay order obtained by the province from Sindh High Court (SHC) against the deduction of outstanding funds of Pepco at source.
The sources said Prime Minister Syed Yousuf Raza Gilani has directed the finance advisor to hold a meeting with Sindh Chief Minister for settlement of the issue amicably. The government has established PHPL under the administrative control of Ministry of Water and Power but the entire debt owed by the power companies has not been transferred to the Holding Company registered with the SECP yet.
The holding company issued Rs 85 billion Term Finance Certificates on September 30, 2009 with a government guarantee. TFCs are not traded on the stock exchange. The transfer of the bulk of the remaining stock of circular debt of Rs 216 billion, which was scheduled to be transferred to PHCL by March 31, is not likely to materialise. The sources explained the reason for the delay in the transfer of debt as stringent conditions of commercial banks.
However, the Asian Development Bank has advised the Finance Ministry not to bow down before these 'unreasonable terms' just for the sake of speed. The sources claimed that the ADB and the World Bank would also support Pakistan in the extension of the IMF deadline.
The sources said the ADB mission which visited last month also expressed dissatisfaction over the performance of power sector especially with regard to appointments to a couple of top positions. The mission, sources said, was of the view that transfer of debt incurred by the public power sector companies for the tariff differential shortfall has been delayed.
The ADB has advised Pepco to co-ordinate with the power sector companies in the implementation of the plan. According to Pepco's business plan submitted to the ADB, its cost-revenue gap is expected to grow to Rs 177 billion, despite notified increase in tariff and fuel adjustment.