The Abbasi administration is reportedly preparing for an "overambitious" bank borrowing and budgetary support plan three months before the end of its tenure, to retire circular debt which has again touched Rs 525 billion. An additional Rs 400 billion of bank borrowing was earlier obtained on behalf of the Discos and parked in the accounts of Power Holding Private Limited ( PHPL), well-informed sources Finance Ministry told Business Recorder.
Power Division, sources said, had shared two summaries ie about Rs 80 billion borrowing from banks to retire IPPs' and PSO's receivables in addition to circular debt retirement plan. With fresh borrowing from banks, PHPL accumulated borrowing will touch over Rs 480 billion.
"Finance Division has made it clear that it has no cushion to arrange funds to retire the huge amount of circular debt but gave the assurance that Q Block will extend GoP guarantee. However, a mechanism of budgetary support is yet to be finalised," the sources added.
Recently, this newspaper asked Secretary Power Division, Yousuf Naseem Khokhar as to how the government intends to retire the circular debt which has crossed Rs 500 billion and he responded that deliberations between Power Division and Finance Division are under progress. The issue of circular debt has also been discussed several times at a meeting of Cabinet Committee on Energy (CCoE). Power Division is also pursuing Finance Division for payment of Rs 92 billion on behalf of AJ&K and FATA.
In another important decision, the federal cabinet approved a proposal of Power Division, directing National Electric Power Regulatory Authority (Nepra) to include increased surcharge tariff, after the Power Division assured that this decision will not increase consumer tariff.
The cabinet was informed that In accordance with the National Power Policy 2013, ECC of the Cabinet in its meeting on August 17, 2007 had recommended the imposition of a surcharge @ 0.10 paisa per KWh on all electricity consumers, except lifeline consumers for funding of the Neelum Jhelum Hydropower project, a decision endorsed by the Cabinet on December 12, 2007. Accordingly, this surcharge was levied from 2008 till December 2015, and extended till June 2018.
The cabinet was apprised that in order to (a) protect low end consumers from price escalation, tariff rationalization and for maintaining uniform tariff rates in respect of each category of consumers across the country and regions, (b) raise funds for the construction and development of Neelum Jhefum hydropower project; and (c) to meet the repayment obligations of mark-up cost on loans obtained against sovereign guarantees of the Government of Pakistan for reducing shortfall in recovering the full cost of electricity and payment of determined and verified costs of power generation to various power producers, the federal government must notify the following surcharges under section 31(5) of the Regulation, Transmission and Distribution of Electric Power Act, 1997.
Power Division assured the cabinet of Tariff Rationalization Surcharge (TRS) at the rate mentioned against specified categories of specified electricity consumers. The collection of the TRS shall be deposited by Discos in a fund called the "Tariff Rationalization Fund" to be kept in an Escrow Account of the Central Power Purchasing Agency Guarantee Limited (CPPA-G) for exclusive use for discharging the liabilities of power producers;
Neelum Jhelum Surcharge is @ 10 paisa per KWh on all electricity consumers of Discos except lifeline domestic consumers of the category 'Residential A-1 till June 2018. The collection of Neelum Jhelum surcharge shall be deposited by the Discos in a fund called the "Neelum Jhelum Hydro Project Development Fund" to be kept in the Escrow Account of the Neelum Jhelum Company for exclusive use for the Neelum-Jhelum Hydro Power Project; and (iii) Debt Servicing Surcharge (DSS) at the rate of Rs 0.43/kWh on account of recovering debt servicing applicable to all the consumer categories on per unit consumption of Discos except lifeline domestic consumers of the category 'Residential A-1," namely, "Debt Servicing Surcharge". The collection of the Debt Servicing Surcharge would be deposited by Discos in a fund called the "Debt Service Fund" to be kept in the Escrow Account of the Central Power Purchasing Agency Guarantee Limited for exclusive use for discharging the liabilities of the power producers.
The sources said tariff determined by Nepra for Discos along with proposed surcharge and subsidy is to be forwarded to Nepra for incorporation of subsidy and surcharge in the schedule of tariff to be notified by the Federal Government under section 31 of the Nepra Act.
Power Division informed the Cabinet that a comparison between the existing uniform notified tariff in the field along with subsidy and surcharge, and the proposed uniform tariff along with subsidy and surcharge, shows that no additional financial burden is being passed on to consumers. The cabinet was further informed that the summary was circulated to Finance Division, which has mostly agreed with the proposals of this Division.
During the course of discussion in federal cabinet, apprehension was shown that revision in surcharge will lead to an increase in the electricity bills of different categories of consumers. Power Division categorically stated that it had requested for the continuation of old tariffs and surcharges, and approval by the cabinet of proposals in the summary will not lead to any increase in the bills of any category of consumers.
The sources said the summary was submitted in accordance with the Supreme Court of Pakistan's judgment reported as PLC 2016 SC 808 for approval of the federal government ie Federal Cabinet, for tariff rationalization for the power sector.