Repayment of power sector loan: Rs 72.63 billion supplementary grant approved by government

ISLAMABAD: The federal government has approved a supplementary grant of Rs 72.635 billion for repayment of the power sector loan as public debt through Power Holding Limited (PHL) for onward disbursements to respective banks, well- informed sources told Business Recorder.

Pursuant to negotiations held with the IMF, the Economic Coordination Committee (ECC) of the Cabinet on May 6, 2020 had approved shifting of the power sector debt stock of Rs.804 billion to public debt.

Accordingly, Finance Division will make repayments of Rs. 804 billion to lenders through PHL to the extent of principal amounts as and when due through cash or financial instruments and power sector shall continue to pay the interest, recovered through tariff and any shortfall will either be met through further debt surcharge by way of amendment in the Nepra Act or efficiency gains.

The loan amounting to Rs. 82 billion taken by PHL from OGDCL and included in the debt stock of Rs.804 billion, being payable to a PSE, is required to be considered separately. As per debt re-payment schedule agreed between PHL and lending institutions, an amount of Rs. 72.635 billion was required to be paid partially during FY 2019-20 and the remaining payable in 2020-21 as principal repayments to lenders.

On October 15, 2020, Finance Division sought the approval of ECC on the following proposal: (i) to obtain supplementary grant of Rs. 72.635 billion for repayment of the loan as public debt through PHL for onward disbursements to respective banks or through financial instruments as and when due during the CFY.

This payment will be treated against outstanding power sector subsidy claims on the part of GoP under the respective heads; (ii) the decision of the ECC of May 06, 2020 on the summary of Power Division may be amended to the extent that the PHL's loan of Rs.136.454 billion being a part of 804 billion, will be paid as and when due, instead of FY 2019-20, inadvertently referred in summary /decision; and (iii) the loan amounting to Rs. 82 billion taken from OGDCL and included in the total of Rs.804 billion being payable to PSE is required to be considered separately through cash/non-cash settlement.

The Secretary, Power Division noted that while considering a summary of the Finance Division on this issue on October 12, 2020, ECC constituted a Committee under the chairmanship of Adviser to the Prime Minister on Institutional Reforms & Austerity comprising Special Assistant to the Prime Minister on Revenue, Secretary, Finance Division and Secretary, Power Division to deliberate on the proposals of Power Division in a holistic manner with special reference to nature of payment and submit viable recommendations to the ECC in its next meeting for consideration.

The Secretary, Power Division stated that Adviser to the Prime Minister on Institutional Reforms and Austerity chaired a meeting of the Committee constituted by the ECC on October 14, 2020 attended by SAPM on Revenue, Secretary, Power Division and Additional Secretary, Finance Division.

A report of the Committee was presented for consideration of the ECC which is as follows: "the meeting unanimously recommended supplementary grant of Rs 72.635 billion with the condition that adjustment as part of the summary will be made against subsidies of Discos claimed but not paid as on June 2020 and Power Division and Finance Division will reconcile outstanding subsidies on half yearly basis."

Copyright Business Recorder, 2020