ISLAMABAD: Ministry of Finance (MoF) has reportedly refused to become part of agreement with K-Electric on Tariff Differential Subsidy (TDS), saying Power Division should sign the pact on behalf of the government of Pakistan (GoP), as “Electricity” is its domain under Rules of Business, 1973, well informed sources in Finance Division told Business Recorder.
Commenting on draft agreement on TDS, Finance Minister has stated that as a matter of principle power subsidies should be restricted to the extent of fiscal resources available to finance them. Restricting the subsidies to budgeted amounts would also help address the issue of circular debt.
Additional claims in the form of SG/ TSG during the currency of the year need to be avoided. These principles should be convened to all Discos. Power Division may get timely approval of the relevant forums for adjustment of tariffs accordingly.
MoF seeks revised draft of TDS pact with KE
As regards the proposed obligations of the GoP in the event of delay in process of TDS claims and charge of interest @ KIBOR+3.5% per annum, Finance Ministry maintains that it would have no objection to the Late Payment Surcharge (LPS), to the extent of budgeted subsidy. The proposed rate of interest appears to be on the higher side, which may be adjusted downwards.
Finance Ministry further stated that KE should be required to provide at the end of each fiscal year relevant record of the subsidy (claims+ releases) along with other required documents for “subsidy audit” to Auditor General of Pakistan for post audit. Terms of Reference (ToRs) of audit to should be decided separately. A penalty clause may be considered in the event of non-provision of record.
According to sources, Finance Ministry further proposed that Power Division may sign the TDS Agreement on behalf of the GoP as “Electricity” is the domain of Power Division under the Rules of Business, 1973 and all issues of generation, transmission and distribution including provision of subsidy to electricity consumers is the mandate of Power Division.
Finance Division may not be added as party to the agreement as the proposed agreement will set a precedent where other entities would also wish to involve Finance Division in service level agreements between them and their service providers/ vendors.
Regarding clause 2.4 of the TDS agreement, AGPR stated that after receipt of verified TDS claims as per availability of funds, and if not rejected or returned back to department/ entity, funds will be released/ placed to K.E within 8 days.
Furthermore, completion of all codal formalities like approval of Cabinet Division, ECC decision and other relevant documents along with copies of verified TDS claims be submitted with claim/sanction of subsidy to enable AGPR for placement of funds to KE, the sources added.
Finance Division has requested Power Division to finalize Standard Operating Procedure for release of KE’s subsidy with the AGPR, accordingly.
A couple of days ago, Finance Ministry had sought draft TDS agreement as recommended by the Task Force headed by former Prime Minister, Shahid Khaqan Abbasi.
Finance Ministry maintained that the draft TDS agreement shared with Finance Division was deliberated upon during the meeting held on March 3, 2023, attended by the representative of K-Electric, Power Division, budget and corporate finance wings from Finance Division.
“It was observed that comments/ views of Power Division and CPPA-G have not been shared along with the TDS agreement,” the sources quoted Finance Ministry as saying.
Finance Division urged the Power Division that necessary views of Law and Justice Division and Nepra on the draft TDS Agreement be sought. And the Power Division should also provide the following for further processing of the case: (i) Power Purchase Agreement (PPA) between KE and CPPA-G; (ii) Interconnection Agreement between KE and NTDC; (iii) Mediation Agreement regarding payable and receivables issues; and (iv) Views of Power Division and CPPA-G on the TDS Agreement.
Copyright Business Recorder, 2023