ISLAMABAD: The cash strapped K-Electric (KE) has sought payment of Rs 25 billion urgently out of its Tariff Differential Subsidy (TDS) receivables, directly, to enable it to keep its operations afloat and timely payment to SSGC, PPL and PSO for fuel supply.
In a letter to Finance Minister, CEO KE has stated that since his last communication of May 17, 2022, mainly due to non-release of TDS and continuous accumulation of government receivables, KE’s total borrowings have increased to Rs 255 billion, up from Rs 236 billion earlier communicated, i.e., an increase of 8% in just a week (till May 26, 2022), a situation which cannot be sustained any further and hence KE would be unable to make timely payments to its fuel suppliers.
“We reiterate our request to release at least Rs 25 billion out of TDS receivables directly to KE to enable it to keep the operations afloat and continue making timely payments to SSGC, PLL, and PSO for RLNG/ indigenous gas and furnace oil,” said Moonis Alvi, the CEO of the power utility company.
On May 17, 2022, in his letter to Finance Minister, CEO KE, stated that the base tariff, which was at Rs 22.5 per unit in June 2021, has also been significantly increased to Rs 31 per unit in March 2022 whereas consumer tariff stood at around Rs 19 per unit.
According to him, the increase in base tariff is due to the recent significant increase in fuel prices including RLNG, as well as, the non-provision of local gas to KE.
CEO of KE argued that as a result of the strained cash flow position due to the continuous accumulation of receivables from government entities, KE’s total borrowings have reached an unsustainable level of Rs 236 billion, which includes Rs 144 billion mainly on account of working capital requirements.
KE’s borrowing levels on June 30, 2021 were Rs184 billion including Rs 116 billion representing mainly the working capital requirements.
He maintained that whilst the banks have financed the historical increase in fuel prices, the exposure to KE has already reached an alarming level, adding that unfortunately the lending capacity of majority of the banks has already been exhausted due to which KE is no longer in a position to finance the existing and incremental price hike.
CEO has sought help of Finance Minister for intervention and support to release TDS directly to KE to enable KE to keep the operations afloat.
In this regard, within the Fiscal Budget for FY 2022, Rs 57 billion was approved for KE’s TDS, out of which CPPA-G received Rs 10.5 billion during the year. Accordingly, KE has requested release of budgeted allocation of Rs 46.5 billion, at least Rs 25 billion be released immediately to KE, enabling KE to manage the company’s severely constrained cash flow position.
“We request Ministry to release net TDS (TDS claim less CPPA Bill) to enable KE to continue making timely payments to SSGC, PLL, and PSO for RLNG/ indigenous gas and furnace oil,” he said, adding that due to the precarious situation, any delay may significantly impact the sustainability of KE’s operations, resulting in a potential power supply crisis for Karachi, the ramifications of which would be far-reaching for the city’s residents and businesses.
Copyright Business Recorder, 2022