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ISLAMABAD: While taking a principled position on proposed draft agreements with the government of Pakistan (GoP) and K-Electric (KE), Ministry of Finance has suggested that Power Division may sign an agreement on Tariff Differential Subsides (TDS) on behalf of GoP, well informed sources told Business Recorder.

Former Prime Minister Shahid Khaqan Abbasi’s led taskforce has already cleared three pacts - Power Purchase Agency Agreement (PPAA), Interconnection Agreement (IA) and Tariff Differential Subsidy Agreement.

The sources said, Power Division prepared its summary on the basis of recommendations of the taskforce and sent it to other concerned Ministries including Prime Minister Office for comments. Most of the Ministries and Prime Minister Office have shared their comments on different clauses of the proposed draft pacts.

PD asked to place KE-related issues before CCER meeting

The sources further stated that the summary is almost ready for submission to the Cabinet along with comments of all concerned Ministries and Prime Minister Office, which wants firm commitment from the power utility in lieu of any concession.

The sources said approximately Rs 4007 billion is receivable from KE as on October 31, 2023 pending due to subsidy dispute between the power utility company and the GoP.

Offering its comments on a proposal to assign any one Division (Power or Finance) to sign the TDS agreements on behalf of Government of Pakistan, Finance Ministry has proposed that Power Division may sign on behalf of GoP as “Electricity’’ is the domain of Power Division under the Rules of Business’ 1973 and all issues of generation, transmission and distribution including provision of subsidy to electricity consumers - the mandate of Power Division.

“Finance Division may not be added as party to the agreement as the proposed agreement will set a precedent where other entities would also wish to involve Finance Division in service level agreements between TDS Agreement on them and their service providers/ vendors,” the Finance Mini8stry added.

On the proposed draft PPAA, ICA, TDS, and Mediation Agreements and authorisation by respective entities to sign the initialled agreements Finance Ministry agreed to the extent of draft PPA, ICA and Mediation Agreements. Finance Division reiterated its views on clause 3.2 of the Agreement conveyed on July 19, 2023 that in the event of non-availability of such additional allocation, mechanism defined in the proviso to clause 6.2.4 (Para-3) of PPA between CPPA-G and K-Electric shall be invoked.

Finance Ministry has also requested Power Division to ensure that the proposed arrangement with K-Electric will have no financial implication for GoP other than TDS claims which will be processed in line with the TDS Agreement.

On July 19, 2023, Finance Ministry stated that it is understood that the QTAs of Discos are applicable for the respective quarters only, while in case of KE, once notified they become part of tariff. This could raise the anomalies. Power Division may; therefore, also explore the possibility of having a similar/ identical mechanism for Discos and KE.

As regards the proposed obligations of GOP in the event of delay in process of TDS claims and charge of interest @ KIBOR+ 3.5 per cent per annum, the relevant offices must ensure that the claims are processed within the stipulated time and the occasion for payment of interest does not arise.

However, MoF shall make efforts for supplementary allocation and in the event of non-availability of such additional allocation, a mechanism defined in the proviso to clause 6.2.4 of PPA between CPPA-G and K-Electric shall be invoked.

Copyright Business Recorder, 2023

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