ISLAMABAD: The federal government has reportedly failed to obtain Parliament's nod meant to impose Debt Servicing Surcharge (DSS) on consumers to pay the interest on loans of over Rs 60 billion, well-informed sources told Business Recorder.
The government, sources said, wanted to get it passed with the Finance Bill but when the draft was presented before the National Assembly Standing Committee on Finance, the members refused to pass it and directed the Finance Ministry to separate it from the rest of the Finance Bill.
"National Assembly Standing Committee did not pass the Nepra Amendment Ordinance which was one of the structural benchmarks agreed with the IMF under the Extended Fund Facility (EFF) 2019-22," the sources added.
According to the World Bank, the government obtained loans from commercial banks at exorbitant rates. The bank says that typical pricing for various tranches of the debt is 3-month KIBOR plus 2 percent, with an average maturity of 5 years. As of September-2019, this is about 15.84 percent (3-m KIBOR on September 19, 2019 was 13.84). On the other hand, in an auction on September 2019 Pakistan Investment Bond was sold at the weighted average yield of 12.367, indicating a difference of 350 basis points (bps).
On June 1, 2020, Secretary Finance, had written a letter to his counterpart in Power Division saying that as he was aware one of the structural benchmarks agreed with the IMF 2019-222 was the submission to Parliament by end -December 2019, amendments in the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997 aimed at ;(i) giving the regulator the power to determine and notify quarterly tariffs;(ii) ensure timely submissions of quarterly and annual petitions by the Discos;(iii) eliminate gap between regular annual tariff determination and notification by the government; and (iv) reinstate the power of the government to levy surcharges over and above the system's revenue requirements under the said Act.
According to Secretary Finance, structural benchmark was achieved, albeit with delay on January 14,2020 when the Power Division submitted the amendment Bill to the National Assembly Secretariat.
Subsequently, however, on the advice of Law and Justice Division, Power Division had to resubmit, vide its letter of April 21, 2020, the Amendment Bill to the Law and Justice Division with the request to introduce it in the National Assembly under rule 28(7) of the Rules of Business, 1973.
As a result, and also because of the delay expected due to onslaught of Covid-19 pandemic on routine legislative work of the National Assembly and Senate, it does not appear to be possible for the amendment to be adopted by the Parliament by end June, 2020 which is another structural benchmark agreed with the IMF under the EFF 2019-22.
"Since achieving this structural benchmark is of utmost importance, and because the amendments in question are critical for systemic efficiency in terms of power tariff determination and notification, optimal revenue collection and reduction in circular debt, Finance Division had advised that the amendments in the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997 be included in the Finance Bill 2020," it was maintained.
The sources said, Power Division had raised Rs 7.5 billion, Rs 25 billion and Rs 30 billion from different commercial banks to pay overdue amounts of power sector entities. However, the interest on these loans have to be recovered from the consumers. Recently, the ECC allocated Rs 10 billion from the Covid-19 related funds to pay the interest on over Rs 60 billion.