A meeting of the Economic Co-ordination Committee (ECC) of the Federal Cabinet Thursday approved payment of three months'' salaries to the employees of Pakistan Steel Mills Corporation (PSM). The ECC meeting chaired by Finance Minister Ishaq Dar on a proposal of Privatization Commission, (PC) regarding approval of two months pending salaries decided to approve three months salary (June to August 2016) for the PSM employees.
Sources said the Ministry of National Food Security and Research proposed for import of 25,000 metric tons of grain pulse to address the demand/supply issue and control the increasing prices of the commodity. The Ministry gave a detailed briefing to the ECC on supply position of grain pulse and its prices in the international market. The Chair directed the Ministry to monitor supply position and prices of gram pulse to cater to the country''s demand.
The ECC directed the Ministry to co-ordinate with the provincial governments for ensuring price control and a steady supply of gram pulse to the market. The ECC also approved issuance of the government''s sovereign guarantee in terms of Syndicated Term Finance Facility (STFF) amounting to Rs 136.5 billion for the power sector after the Ministry of Water and Power requested it to do so because Power Holding (Private) Limited is a public sector entity and it will be responsible for arranging the loan amounting to Rs 136.5 billion for power sector companies.
The meeting was informed that power distribution companies are facing financial problems in payment of long outstanding power purchased dues to Central Power Purchasing Authority (CPPA), mainly due to less subsidy budgeting, low revenue collection and lower applicable tariff, which do not fully cover the cost of services delivered.
The meeting was further informed that increase in thermal generation through furnace oil is also adding to the cost of power generation that is not being recovered through tariff. All these factors are affecting the cash flows of distribution companies, thus limiting their ability to settle their power purchase liability towards CPPA. Therefore, the CPPA cannot pay the power purchase cost to IPPs and GENCOs, which ultimately leads to a reduction in power generation and an increase in load shedding.
A Syndicated Term Finance Facility for Rs 136.454 billion had been executed between Power Holding (Private) Limited and Syndicate after the approval of the ECC in 2012. The financing facility was utilised for the purpose of funding of the repayment liabilities of the Discos and it was originally for a period of 5 years with a grace period of 2 years. The tenure of the financing facility was subsequently extended from 5 years to 7 years and consequently the grace period was also extended from 2 years to 4 years, as approved by the ECC in 2014.
Payments to syndicate on account of mark-up in respect of the PHPL financing facilities are made out of revenues generated by distribution companies from consumers through imposition of debt servicing surcharge. Since the date of execution of the financing facility, 17 mark-up instalments amounting to Rs 65.081 billion have been paid through sources of power sector in respect of Rs 136.454 billion STFF.
The principal instalment amounting to Rs 11.371 billion is also payable per quarter now. The Ministry of Water and Power and Ministry of Finance are working on a settlement plan for these liabilities; however due to limited fiscal space available and liquidity, power sector does not have capacity to pay the principal instalments.
The meeting was further informed that distribution companies will have to arrange funds through borrowing from banks in order to discharge their liability towards syndicate. The proposed loan will be arranged on behalf of power distribution companies by Power Holding (Private) Limited through a syndicated term finance facility from the existing consortium of local commercial banks.
The meeting was informed that the STFF will be utilised to adjust the existing facility of Rs 136.454 billion. The syndicate has agreed to provide the financing facility. The draft term sheet received from Habib Bank Limited (HBL) was also presented to the ECC. The Finance Division has also approved the terms and conditions of the subject facility and advised to approach ECC of the Cabinet for approval of the new government guarantee.
The meeting was informed that Power Holding (Private) Limited is a public sector entity without assets and it will be responsible for arranging loan amounting to Rs 136.454 billion for power sector companies. The Ministry of Finance will provide a government guarantee for repayment of loan as well as interest for Rs 136 billion financing facility arranged through a consortium of local banks.
The servicing of mark-up, principal repayments and all other amounts becoming due and payable in respect of the subject facility will be the responsibility of Power Holding (Private) Limited. Pursuant to the arrangement, Power Holding (Private) Limited will be entitled to a rebate of one percent, amounting to Rs 1.364 billion per annum, on payment of mark-up within 15 days of the due date.
The ECC allowed the Ministry of Petroleum and Natural Resources to replace Lower Zakum crude price with Das Blend crude price to determine basket price for oil refineries. The Ministry of Petroleum and Natural Resources apprised the ECC that previously Lower Zakum crude oil was included for determining basket price of crude being supplied to oil refineries in Pakistan. The Platts Global Alert has stopped publishing the price of the Lower Zakum crude oil; therefore, requisite replacement was accorded.