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ISLAMABAD: Ministry of Finance (MoF) has reportedly turned down Circular Debt Management Plan (CDMP) of OGDCL, PPL and GHPL prepared by Petroleum Division on non-cash settlement basis, sources close to Secretary Petroleum told Business Recorder.

Petroleum Division apprised the meeting held in Finance Division that a circular debt management plan for OGDCL, PPL and GHPL has been developed; Government of Pakistan (GoP) holds 85 percent, 74.86 percent and 100 percent shares in these companies respectively and a significant portion of natural gas produced by these companies is procured by SNGPL, SSGS and power sector.

Outstanding receivables of these three entities have reached an alarming level of Rs 1.6 trillion comprising principle of Rs 1.124 trillion and interest/LPS amounting to Rs 448 billion as of June 30, 2022 approximately.

The meeting was briefed that under the scheme, GoP, being a major shareholder in the three State Owned Enterprises (SoEs), may use prospective dividends to settle a sizeable portion of receivables. The meeting was informed that out of total receivables of OGDCL from GHPL amounting to Rs 142 billion, an amount of Rs 82 billion constitutes as principal and the remaining as interest.

Power sector: Circular debt touching Rs2.6trn mark

According to the proposed settlement scheme, in a first, GoP/Finance Division to swap Sukuk worth Rs 142 billion issued by PHPL to OGDCL back in 2013 as part of the power sector circular debt with Pakistan Investment Bonds (PIBs) in phases to enable the SOEs to consider announcement of appropriate amount of dividend to be announced by the respective entity.

The sources said the dividend so declared by OGDCL minus dividend paid to non-controlling shares will be ploughed back as supplementary grants for SNGPL, SSGCL and CPPA-G to settle their payables towards OGDCL, PPL and GHPL. All these settlements will be on a non-cash basis.

The sources maintained that both Securities and Exchange Commission of Pakistan (SECP) and London Stock Exchange (where applicable) will be taken on board by the respective SOEs. Appropriate steps will be taken by the listed companies in this regard to prevent insider trading.

Additional Secretary (budget) Finance Division, Tanveer Butt, observed that certain aspects of the proposed plan are ambiguous and detailed discussions are needed for developing a clear way forward. Moreover, revenues have to be booked and accounted for instead of non-cash, therefore, a separate meeting of Petroleum Division with Budget Wing, Finance Division is required.

After detailed deliberations, the meeting decided that further deliberations will be held at the level of Finance Secretary, once following steps are taken by the Petroleum Division: (i) Petroleum Division will hold separate meetings with Budget Wing, Finance Division; and (ii) legal aspect may be examined by the Petroleum Division on the proposed mechanism to settle the issue of circular debt in gas and power sector.

Copyright Business Recorder, 2022

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