Power sector receivables: ECC waives Rs 50 billion despite MoF opposition

The Economic Co-ordination Committee of the Cabinet has waived Rs 50 billion to Sindh government on account of power sector receivables despite stiff resistance by the Ministry of Finance. A meeting of the ECC presided over by Finance Minister Ishaq Dar gave approval to the settlement reached between the Ministry of Water and Power and the government of Sindh to resolve the issue of outstanding bills of government of Sindh departments and Hesco/Sepco for the period of July 2010 to July 2016.
The government of Sindh will clear the outstanding amount of Rs 27.398 billion in six equal monthly instalments starting from September 2016. In the same decision, the Chair also directed the Ministry of Water and Power for installing AMR metres (smart metres) in the area within four months, with 50% of the cost of the installation of meters to be borne by the government of Sindh so that the issue may be settled on a permanent basis.
Sources said the Finance Division informed the ECC in writing that waiver of amount was a deviation from the decision of Council of Common Interest (CCI). According to the decision of the CCI, at source deduction of reconciled bills of Discos and government receipts has to be made by the federal adjuster which is being implemented. The current arrangement agreed upon is a deviation from the decision of the CCI and thus is not legally tenable. The basis/ rationale of the proposed settlement has neither been clearly spelt out, nor does any rule or policy suggest to write off Rs 50.18 billion out of arrear amount of Rs 77.54 billion, ie, 65 percent of the due amount approximately.
The sources said that against the total outstanding amount of Rs 128.44 billion, the government of Sindh has already paid Rs 50.90 billion without any agreement/settlement. Therefore, the amount available for the proposed settlement is Rs 78.21 billion. The 60 percent of this amount, therefore, comes to Rs 47 billion instead of Rs 27 billion.
The amount billed to the government of Sindh was electricity tariff, based on the determination of Nepra and notified by the government of Pakistan which can neither be adjusted at a later date nor as any such precedent exists as proposed by the Water and Power Ministry.
According to sources, the government has paid Tariff Differential Subsidy (TDS) based on entire billing from July 2010 to July 2016 to companies. The amount paid in excess has to be refunded to the government. "The proposed settlement will create a precedent for other provinces and the Ministry of Water and Power may not be able to entertain such requests," the sources continued.
A participant of the meeting said there was a dispute of reconciliation of receivables of power sector between the federal and provincial governments and with its resolution; applicability of federal adjustor was considered a difficult task. According to that participant, federal adjustor would become self operational and Finance Ministry would make at source deduction of receivables on account of power sector.
According to a statement of Finance Ministry, the ECC also approved a reduction in gas price for Industry from Rs 600 to 400 per MMBTU. In accordance with the Fertiliser Policy 2001, the industrial sector gas sale price will also be applicable to fertiliser sector only for fuel stock. The ECC considered and approved the summary presented by the Earthquake Reconstruction and Rehabilitation Authority (ERRA) regarding exemption of taxes on procurement of furniture and supplies of 15 district health units (DHU) and at three colleges located in the 2005 earthquake-affected areas in the AJ&K and Khyber Pakhtunkhwa.
The exemption is limited to the transaction of SDF grant. Saudi Fund for Development has provided funds through a grant and mandated the UNICEF for procurement of furniture and supplies for the reconstruction of these educational institutions. The exemption has to be obtained from the ECC as the powers to grant exemption through SROs have been taken away from FBR/Revenue Division vide the Finance Act, 2015.
The ECC also accorded approval to the proposal of the Ministry of National Food Security and Research regarding an extension in export period of thirty (30) days from the date of approval ie 15-06-2016 on the same terms and conditions already approved by the ECC in its meeting on March 18, 2016.
The chairman said the extension is limited for the balance quantity already approved for export for Sindh and Punjab. The Ministry apprised the ECC that the food departments of the governments of Sindh and Punjab and All Pakistan Flour Mills Associations and exporters have pleaded for extension as the specified quantity of wheat/wheat flour (Aata) could not be exported within the specified period due to Eid holidays and transportation problems, etc.
The ECC was also approached by the Ministry of National Food Security and Research to grant an extension of thirty days to allow the rebate payment on export of wheat and wheat flour (Aata) ie 30th September 2015 to 30 October 2015. It was decided that the extension in payment of export rebate would only be available to those exports which have been shipped/transported (GD) on or till 30th September 2015 deadline. The ECC upheld the earlier decision that export of wheat and wheat flour (Aata) made during the period from 1st October 2015 to 12th January 2016 shall not be entitled for any such support.