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ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet has approved Rs4 billion as subsidy for supply of 100 percent RLNG to export-oriented industry for the month of March 2020; however, it constituted a sub-committee on payment of Rs89.86 billion as first installment to the Independent Power Producers (IPPs)

The ECC meeting presided over by Minister for Finance and Revenue Shaukat Tarin, on Wednesday, was submitted two summaries by the Power Division with the first one regarding the release of subsidy for supply of 100 percent RLNG to export-oriented industry for March 2020 and other for approval of supplementary grant of Rs89.86 billion for payment of first instalment (40 percent) to the IPPs in accordance with the payment mechanism.

An official said the meeting approved Rs4 billion as subsidy for March 2020. The meeting decided to form a sub-committee consisting of Adviser to the Prime Minister on Commerce, Special Assistant to the Prime Minister (SAPM) on Power and other relevant stakeholders to review the power subsidies provided to export-oriented sectors, with a direction to submit a holistic proposal before the ECC.

The Power Division presented another summary before the ECC regarding the release of the first installment of payment to the IPPs.

The ECC decided to constitute a sub-committee under the chairmanship of Federal Minister for Finance with members, ministers and secretaries from Energy, Petroleum and other concerned ministries for further deliberations.

The sub-committee would present a firmed-up proposal before the next ECC meeting for consideration and approval.

Sources said the Power Division in the summary moved to the ECC stated that the Cabinet Committee on Energy (CCoE) and the ECC considered the report by implementation committee and approved the payment mechanism and agreements with the IPPs in meetings held on 8th February 2021 and the same was ratified by the Cabinet on 9th February 2021.

The payment mechanism required the first installment of 40 percent of the payables to the IPPs (as these stood on November 30, 2020) to be paid within 30 business days of signing of the agreement for the IPPs under the pre-Nepra regime and within five business days of notification of revised tariff determination for the IPPs under NEPRA regime.

The Nepra has issued the revised tariff determination for all the 24 IPPs, which have signed agreements, including 12 IPPs under the 2002 Power Policy and 12 IPPs under the 2006 RE Policy, therefore, the first installment will become due within five business days of its notification, which is pending with the government.

A summary was submitted to the ECC by the Power Division on 17th February 2021; however, its consideration was deferred till the next ECC meeting.

The summary was again placed on the agenda of ECC 10th March, 2021 and was again deferred due to paucity of time and was not brought on the agenda of the ECC after that date, so far.

Since additional events had taken place, subsequent to the submission of the summary on February 17, 2021, another summary was submitted to the ECC on 6th April 2021.

The summary was considered by the ECC on 7th April 2021 but it was deferred. The Power Division added that this summary has also not been brought on the agenda of the ECC after that date.

Since the submission of the summary dated 6th April, 2021, the Nepra has issued the determinations.

Moreover, the FBR has also initiated the process to look into the matter of taxation of the contractors at four percent of the relevant payment in respect of the IPPs under the 1994 policy.

Pursuant to the agreements and as per payment mechanism, the first installment is due towards two IPPs under pre-1994 Power Policy, six IPPs under the 1994 Power Policy, and 12 IPPs under the 2006 RE Policy including bagasse, wind, and solar.

Total amount of this installment for these IPPs would be Rs89.86 billion.

The following are IPP-wise details of the payable as on November 30, 2020, and amount of the first installment and second installment of these IPPs:

The first installment of forty percent of said payables will be paid 1/3rd in cash, 1/3rd in Sukuk, and I/3rd in PIB bonds at floating rate of T-Bill + 70 basis points in accordance with the payment mechanism.

Payment of first installment (40 percent) in the same manner has also become due for 12 IPPs under the 2002 Policy.

One of the conditions of effectiveness of the Master Agreements with the IPPs is as under: (a) "for IPPs under pre NEPRA regime: "from and after the date of first installment under the Payment Mechanism and till the date the Company revives IOU% of the amount described under the Payment Mechanism and till the date the company receives 100 percent of the amount described under the payment mechanism for IPPs under the Nepra regime; (b) after notification of the revised tariff determination in line with the tariff adjustment Application and payment of the first installment under the under-Payment Mechanism, and till revised tariff effective Date, the parties agree that the seller shall commence giving discount in its invoices consistent with the notified tariff and this Agreement".

The Finance Division has asked for a summary to be moved to the ECC for seeking a Supplementary Grant/Technical Supplementary Grant on account of outstanding subsidy claims of fiscal year 2019-20 and 2020-21 under the Power Division's demand for the financial year 2020-21 for release of payment to the IPPs.

The ECC was requested that in continuation of the previous summary dated 6th April 2021 these proposals are submitted for consideration; (a) the FBR may review the matter of taxation of contractors at the rate of four percent of the relevant payment and determine whether the allegations contained in the pars 157 of the report by the Negotiations Committee are based on facts and if any recoveries are due to be made from the relevant IPPs; such recoveries may be made from future payables of the relevant IPPs after the determination of FBR; (b) payments to all IPPs under the Power Policy 2002, which have signed Agreements pursuant to MoUs, may be withheld, till the conclusion of the NAB investigation; (c) suspend the process of signing arbitration submission agreements with IPPs under 2002 Power Policy, and notification of their revised tariff as determined by NEPRA, till the conclusion of NAB investigation; (d) payments to all other IPPs (except those mentioned in (b), may proceed according to the signed agreements; (e) to take any other action ancillary thereto which may assist the NAB investigation; (f) supplementary Grant equivalent to Rs89.86 billion for the payment of first installment may be approved and released to the Power Division, in accordance with the payment mechanism.

The ECC also approved Technical Supplementary Grants; (i) Rs22.7 million for the Law and Justice Division for meeting the shortfall of funds under various administrative and related heads; Rs10.025 million in favour of the Ministry of Human Rights to fund the National Trust for the Disabled (NTD), Islamabad; (iii) Rs7.2 million in favour of the Ministry of Housing and Works for the execution of development schemes of the Interior Division; (iv) lastly, Rs262 million in favour of the Ministry of Housing and Works for meeting various necessary expenses.

The ECC meeting was attended by Federal Minister for Interior Sheikh Rashid Ahmad, Federal Minister for Economic Affairs Division Omar Ayub Khan, Federal Minister for Energy Muhammad Hammad Azhar, Federal Minister for Privatisation Muhammad Mian Soomro, Federal Minister for Railways Azam Swati, Adviser to Prime Minister on Institutional Reforms Dr Ishrat Hussain, SAPM on Power Tabish Gauhar, SAPM on Revenue Dr Waqar Masood Khan, Federal Secretaries, Chairman Board of Investment (BOI), Chairman Securities Exchange Commission of Pakistan (SECP), and other senior officers, while Governor State Bank (SBP) Dr Reza Baqir attended the meeting through a video link.

Copyright Business Recorder, 2021


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