ISLAMABAD: The Central Power Purchasing Agency-Guaranteed (CPPA-G) has sought Rs 100 billion more from the government to clear a major part of overdue payments of Chinese power plants, well informed sources told Business Recorder.

CPPA-G is seeking additional funding of Rs 100 billion from the government for CPEC power plants at a time when other power plants like M/s Saif Power, M/s Attock Gen, M/s Hallmore Power, SNGPL, PSO, etc., have also written letters to CPPA-G for payment of overdue payments in tune of billions of rupees. A couple of power plants have already sought payments of their dues in accordance with renegotiated agreements.

According to Chief Financial Officer (CFO) CPPA-G, due to poor cash inflow remittances from Discos to CPPA-G and a sharp increase in energy prices in international market, the power generation companies, especially the IPPs under CPEC projects, are pressing hard for clearance of their overdue payments to maintain their fuel supply chain functional. The Cabinet Committee on Energy (CCoE) has recently been informed that the Chinese IPPs have refused to review their contracts.

The sources said that the ECC has already approved a release of Rs. 100 billion in two instalments to meet the requirement of power sector in its decision of January 05, 2022. CPPA-G has already received Rs. 50 billion, being the 1st tranche of approved subsidy of Rs. 100 billion, which has been paid to the IPPs under CPEC in the month of January 2022.

CPPA-G is of the view that for the payment, Tariff Differential Subsidy (TDS) budget was utilized with the promise that when required, a further supplementary grant will be allowed.

Keeping in view the prevailing situation and given the fuel supply chain’s requirements for winter months, CPPA-G has requested Power Division to put up a summary to the ECC for supplementary grant of Rs. 100 billion to be adjusted against TDS budget of Rs. 50 billion and payment of Rs. 50 billion to the CPEC projects. The sources maintained that the issue of overdue payments of Chinese projects was one of the key topics of discussion during the recent visit of Prime Minister Imran Khan to China. Moreover, the Chinese authorities and all the project sponsors have already taken up this matter again and again at different fora.

CPPA-G has also informed the government that due to sanctions on Iran which resulted in non- availability of banking channels it was decided in the 19th session of Pak-Iran Joint Economic Commission (JEC) held on 8-9 Dec 2014 that in order to resolve the issue of outstanding payments, necessary arrangements shall be made to make payment to Tavanir’s designated companies within Pakistan as an alternative arrangement. Up till now, the payments to M/s Tavanir are being made accordingly.

The decision regarding alternate mechanism of payment was re-enforced during the meeting held on March 14-15, 2019 between Tavanir, Ministry of Energy (Power Division) CPPA-G and NTDC and is also the part of amendment 7 to the Contract agreed between CPPA-G and Tavanir, Iran, on January 01, 2022 which is in process of approval.

Keeping in view the above, CPPA-G receives Payment Order Letters (POL) from Tavanir, in which Tavanir’s nominates beneficiary on its behalf to receive the payments and CPPA-G makes these payments to the designated beneficiaries in equivalent Pak Rupees in Pakistan.

However, while making payments to certain beneficiaries by CPPA-G, the funds have been reverted back to CPPA-G by the beneficiary’s scheduled bank with the remarks that there are certain compliance issues. The beneficiaries have communicated CPPA-G that scheduled banks are unable to comply with banking requirements. This has already been forwarded to the Power Division on December 13, 2019.

In view of this, banking issues and cash flow constraints in the sector, the payments are being delayed to the beneficiaries and it has resulted in an accumulation of outstanding liability of $62 million to M/s Tavanir.

CPPA-G has requested that Ministry of Energy may take up the matter with relevant stakeholders and at appropriate forum to address the payment issue of Tavanir in absence of banking channels as stated above to ensure electricity supplies from Iran on sustainable basis.

Copyright Business Recorder, 2022