Power Distribution Companies (Discos) have reportedly adopted a rebellious attitude in payment of mark up amounting to Rs 18 billion per annum on financing facility of Rs 136.45 billion arranged by the Finance Ministry to ease out circular debt.
"Power sector is in default of not making payment of mark up of Rs 4.2 billion on the loan availed by Power Holding Company Limited (PHCL) to pay off power generators.
PWPCO on the advice of Water and Power Ministry had written a letter to few of the Discos to remit an amount of Rs 1.59 billion to make up the total amount of Rs 4.2 billion after adding up the balance from revenue collection but Mepco, Lesco and Hesco refused to remit the amount by raising objections," said an official of Pepco from Lahore.
According to him, power sector is in default since May 21, 2012 and immense pressure has been built up by the Ministry of Finance and the bankers to pay off the due liability.
"In case of non payment, banking system may refuse to extend loans to the power sector system apart from loans arranged by the Ministry of Finance as well as stop opening or extending Letters of Credit (LC)," he added.
PHCL, a subsidiary of Water and Power Ministry, has reportedly struck multi-partite agreement with the banks for Term Finance Certificates (TFCS) worth Rs 136.45 billion under the guidance of Pepco which compelled the resisting Discos to honour the agreement.
A top official of the Ministry of Water and Power claims that the Discos have paid first instalment interest of Rs 4.5 billion to the banks and each company contributed its share to the extent of liability.
Last month, Abdul Majid Alvi, Chief Financial Officer, Pepco, wrote a strong worded letter to the Chief Executives Officers (CEOs) of the Discos for not implementing the directives of Water and Power Ministry in this regard.
"We have conveyed our concerns regarding delay in the execution of multi-partite agreement and non-provision of board resolutions by a few Discos," Majid Alvi said in his letter.
According to him, the matter was brought to the notice of each Disco time and again but they did not reach a consensus.
On March 27, 2012, Mr Alvi apprised the Water and Power Ministry that HBL has graciously given its consent whereas Discos have not moved an inch despite the lapse of 15 days of the extended time ie which expired on April 9, 2012.
Lots of communications among the stake holder has taken place since but all in vain.
The names of banks and amount being transferred to the PHCL''s books are as follows: Allied Bank of Pakistan (ABL) Rs 21.01 billion, Askari Bank Limited Rs 9.98 billion, Habib Bank Limited (HBL) Rs 23.32 billion, Muslim Commercial Bank (MCB) Rs 8.932 billion, Atlas Bank Rs 6.72 billion, National Bank of Pakistan (NBP) Rs 20.19 billion, Bank Al-Habib Limited Rs 5.25 billion, Samba Bank Limited Rs 800 million, NIB Rs 3.18 billion, Habib Metropolitan Bank Rs 3.33 billion, Faysal Bank Limited, Bank-Alfalah Limited, Citi Bank, Soneri Bank Limited, Summit Bank and the Bank of Punjab also extended signed debt swap agreements with GoP, however, the amounts are not known.
On May 8, lead advisors and arrangers of financing facility wrote a letter to the Ministry of Water and Power, saying that banks have always shown willingness at every stage of the transaction to discuss and amicably resolve all outstanding issues pertaining to the agreement and this is apparent from a number of conference calls and meetings held with the stake holders; as well as the extension in time period granted by the banks at the request of Pepco/Discos for the signing of the agreement.