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ECC refuses to consider Power Division’s Rs100b financial injection proposal

Sources say information had been sought from the CPPA-G, according to which Rs217.51 billion are payable against 12 CPEC IPPs as on February 24, 2022
Power Division submitted the following two proposals before the ECC: (i) release Rs100 billion as Supplementary Grant of which Rs50 billion would be by way of SG under the head of Tariff Differential subsidy (TDS) and Rs50 billion by way of SG as in the head investment in DISCOs; and (ii) allow CPPA-G management to negotiate with CPEC IPPs to accept the payment of Rs50 billion in the form of Pakistan Investment Bonds and Sukuk based on the terms and conditions of currently available offers by the Ministry of Finance (Rs25 billion each). Reuters/File
Power Division submitted the following two proposals before the ECC: (i) release Rs100 billion as Supplementary Grant of which Rs50 billion would be by way of SG under the head of Tariff Differential subsidy (TDS) and Rs50 billion by way of SG as in the head investment in DISCOs; and (ii) allow CPPA-G management to negotiate with CPEC IPPs to accept the payment of Rs50 billion in the form of Pakistan Investment Bonds and Sukuk based on the terms and conditions of currently available offers by the Ministry of Finance (Rs25 billion each). Reuters/File

The Economic Coordination Committee (ECC) has reportedly refused to entertain Power Division’s proposal of Rs100 billion financial support after Finance Division shared information about severe financial constraints.

Prime Minister held two meetings - on January 14 and January, 26 2022, prior to his visit to China. During discussion, the Power Division was directed to process the case for release of Rs 100 billion to CPEC IPPs against their receivables.

A follow up meeting was held in the Finance Division (FD) under the Federal Minister for Finance on February 02, 202, wherein it was reiterated that the receivables by CPEC IPPs be cleared on priority and a case be placed before the ECC for release of the remaining Rs 50 billion to CPEC IPPs as they were under massive pressure due to increasing price of inputs especially imported coal.

The sources said information had been sought from the CPPA-G, according to which Rs217.51 billion are payable against 12 CPEC IPPs as on February 24, 2022.

On March 17, 2022, it was noted that in order to keep the power sector afloat and to fulfill the fuel requirements, power sector subsidy claims need to be released on urgent basis. For this, an additional Supplementary Grant (SG) of Rs50 billion was required to be released. And release of Rs50 billion as second tranche would help manage fuel supply of coal-based power plants mainly CPEC projects.

Power Division submitted the following two proposals before the ECC: (i) release Rs100 billion as Supplementary Grant of which Rs50 billion would be by way of SG under the head of Tariff Differential subsidy (TDS) and Rs50 billion by way of SG as in the head investment in DISCOs; and (ii) allow CPPA-G management to negotiate with CPEC IPPs to accept the payment of Rs50 billion in the form of Pakistan Investment Bonds and Sukuk based on the terms and conditions of currently available offers by the Ministry of Finance (Rs25 billion each).

During the ensuing discussion, the Power Division stated that the power sector was currently facing an unprecedented cash-flow constraint due to escalation in the global price of fuel, increasing capacity payments owing to induction of new capacity (especially under CPEC projects) and increasing consumer end tariff.

Power Division further argued that any further payment beyond the set order would not be possible without injection of cash flows by the Finance Division.

Responding to the Power Division, Finance Division stated that there was a severe financial constraint, therefore, it would be very difficult to arrange proposed funds of Rs100 billion through Supplementary Grant. The ECC observed that since matter was of urgent nature, therefore, Rs50 billion may be provided for this purpose.

After detailed discussion, ECC approved Supplementary Grant of Rs 50 billion under the head of TDS to replenish TDC budget and utilize it for making emergent payment in January 2022.

The ECC, however, did not approve Rs100 billion financial support i.e. Supplementary Grant of Rs50 billion as investment in DISCOS and Rs50 billion as PIB and Sukuk.

The story was originally published in Business Recorder on March 26, 2022.

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