The performance of Chief Executive Officers (CEOs) of Distribution Companies (Discos) has reportedly been linked to paying back bank loans and parked in books of Power Holding Company Limited (PHCL), well informed sources told Business Recorder. The sources said the government arranged Rs 231 billion (Rs 136 billion+ Rs 15 + Rs 80 billion) from different banks in previous years to pay to the Independent Power Producers (IPPs) and Pakistan State Oil (PSO).
However, later on the government established PHCL to receive amounts from Discos along with interest to pay back to the banks. The sources said Discos initially adopted a rebellious attitude in payment of mark up amounting to Rs 18 billion per annum on financing facility of Rs 231 billion arranged by the Finance Ministry to ease out circular debt.
The sources said Pakistan Electric Power Company (Pepco) on the advice of Water and Power Ministry had written letters to a few Discos last year 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.
According to sources, power sector was in default since May 21, 2012 and immense pressure had been built up by the Ministry of Finance and the bankers to pay off the due liability. At one stage the situation became dire and Pepco argued that 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 had struck multi-partite agreement with the banks for Term Finance Certificates (TFCs) worth Rs 131 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 told this scribe that all the Discos were paying their share to retire the loan and some of them had already paid their entire share.