ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet has allowed Power Division to absorb surplus employees of Generation Companies (Gencos) in Distribution Companies (Discos) but is unwilling to approve financial resources for their pensionary benefits, well-informed sources told Business Recorder.
Sharing details, sources said Cabinet Committee on Energy (CCoE) during its meeting held on September 10, 2020 decided immediate closure of certain power plants/units of Generation Companies (Gencos) having aggregate capacity of 1798MW.
Pursuant to the CCoE decision, Gencos were required to apply to Nepra for amendment in their respective generation licences (licencee, proposed modification-LPM) to accordingly reduce their capacities.
With such modification in the generation licences, tariff of respective plants will be discontinued, resultantly Gencos will cease to get capacity charges in lieu of 1796MW units.
Gencos are paying salaries and pensions out of the capacity charges. Gencos will not be in a position to pay salaries to 1937 employees and pension to 2268 after de-licencing of these plants.
On the direction of Power Division and based on a detailed list provided by GHCL, Pepco worked out the possibility of adjusting surplus employees in various Discos. Accordingly, Pepco confirmed the possibility of adjustment of 1806 employees (ranging from BPS-1 to BPS-16) in Discos subject to payment of their accumulated pension contribution by respective Gencos to Discos on the cut-off date. The remaining 131 employees (out of total 1937 employees) are either retiring shortly (70 employees) or working on contract (21 employees) or otherwise working at higher scales (40 employees) that will be adjusted within Gencos as and when vacancies become available.
Pension expenses for 2268 pensioners amount to Rs 3.134 billion per annum (based on FY 2019-20). Actuarial valuation of pension benefits of employees (proposed to be adjusted in Discos) is Rs 14.409 billion as on June 30, 2020 that will be subject to adjustment as on the cut-off (actual adjusted) date.
The sources said, Power Division has submitted two proposals to sort out employees’ issues: (i) Finance Division may give a one-time grant of Rs 14.435 billion, subject to adjustment on cut-off date to Gencos for onward payment to Discos in accordance with the actuarial value of pension and pension benefits of 1806 surplus employees of plants to be closed immediately; and (ii) Finance Division may take over the liability of existing 2258 pensioners of the power plants with annual liability of Rs 3.134 billion.
According to the CCoE’s decision, the government decided to close defunct plants (Gencos) of 1519MW which will result in a saving of Rs 5.674 billion per annum CPP. There are 2,015 working employees and 2,077 pensioners attached to these plants whose annual salaries and pension impact translate into Rs 1.326 billion and Rs 2.9121 billion, respectively. The accumulated liability on account of pensionary benefits amounts to Rs 24.614 billion as on June 30, 2020.
The plants/units to be retired are as follows: (i) TPS Jamshoro (unit 2&3) 340MW (strategic asset); (ii) GTPS Kotri (unit 3&7) 130MW (delicenced by Nepra); (iii) Block 3&4, 450MW (delicened by Nepra); (iv) TPS Quetta, 22MW (delicenced by Nepra); (v) TPS Muzaffargarh (5&6), 355MW; (vi) SPS Faisalabad (units 1&2) 92MW (delicenced by Nepra); (vii) GTS Faisalabad (units 1&4) 75MW (delicenced by Nepra); (viii) NGPS Piranghaib, Multan (units 1, 3 & 4) 192MW (delicenced by Nepra); (ix) GTPS Shahdara (units 1 to 6) 85MW; and (x) FBC Lakhra (units 1&2) 70MW.
Retained plants will result in a saving of Rs 8.608 billion per annum and permanent reduction in capacity by 2475MW. There are 2,987 working employees and 2,215 pensioners attached to these plants whose annual salaries’ and pensions’ impact is estimated at Rs 2.318 billion and Rs 4.416 billion, respectively. The accumulated liability on account of pensionary benefits amounts to Rs 37.560 billion as on June 30, 2020.
TPS Jamshoro 400MW (units 1&4) will be retained during low wind; GE Block (units 5 to 10) 415MW to be retained on merit order; Siemens Block (units 11 to 13) 413MW to be retained if unit 13 is restored; 747MW Block (units 14 to 16) 747MW to be retained; TPS Muzaffargarh (units 1 to 14) 920MW to be retained in the system as contingency reserve with gas fuel; GTPS Faisalabad (units 5 to 9) 140MW will be retained till commissioning of Trimmu power house and also reactive compensation in Faisalabad area till installation of SVC and 525MW CCPP Nandipur to be retained on merit order. Talking about impact of plants on active list for privatisation, the sources said the privatisation model will be decided by Privatisation Commission. However, there are 634 working employees and 498 pensioners attached to the plants whose annual salaries’ and pensions’ impact is Rs 305 million and Rs 666 million, respectively. The accumulated liability on account of pensionary benefits amounts to Rs 10.293 billion as on June 30, 2020.
Recently, the case was presented before the ECC, wherein Power Division sought a one-time grant of Rs 14.5 billion (subject to adjustment on cut-off date) to Gencos for onward payment to Discos for the actuarial value of pension and pensionary benefits of 1753 surplus employees and also take over the liability for payment of pension to existing 2368 pensioners of power plants having annual pension liability of Rs 3.5 billion of power plants decided to be closed immediately by CCoE.
During the ensuing discussion, Adviser to the Prime Minister on Institutional Reforms & Austerity (IR&A) Dr Ishrat Hussain noted that the cost benefit analysis of the proposed measure was not mentioned in the proposal. Moreover, he stated that Discos were already overstaffed. Therefore, further absorption of Gencos’ employees particularly unskilled workers into the Discos would badly impact their financial position and that grant of pension to Gencos employees would set a bad precedent.
Secretary, Finance Division, Kamran Ali Afzal also endorsed the views of the adviser on IR&A. SAPM on Revenue and Finance, Dr Waqar Masood, while endorsing the views, suggested that other options may be explored to meet expenditure on payment of pensionary/retirement benefits of Gencos employees like from the sale proceeds of assets of Gencos, etc.
SAPM on Power and Petroleum, Tabish Gauhar stated that a saving of Rs 7.00 billion per annum approximately would be expected out of the proposed measure. He stated that if the pension liability is not paid out of the government resources, it would impact the circular debt as the burden will have to be passed on to the consumers through increase of tariff.
After a detailed discussion, the ECC expressed no objection on absorption of surplus Gencos’ employees in Discos. However, the proposal regarding provision of funds for this purpose was not approved. Power Division was directed to analyse viable options for resolution of the pension issues of Gencos employees and submit it for consideration of the ECC.
Copyright Business Recorder, 2021