The volume of power sector circular debt including Power Holding Private Limited (PHPL) stocks has risen to about Rs 1.7 trillion, a potential threat to the country''s economy and power sector. The claims of incumbent government of reducing it substantially appear to be incorrect.
The sources said, Power Division has completed all codal formalities including identification of properties to be pledged with the consortium of banks against the loans but the issue of guarantees is still unresolved.
"Finance Division has sent the case to SBP for comments and volume of guarantees which are to be retired to provide space for fresh facility. The Ministry of Finance is waiting for Central Bank response," the sources added. According to the agreement with International Monetary Fund (IMF), Pakistan cannot extend sovereign guarantees over and above a specific limit of debt to government ratio.
The sources further stated that Finance Division has retired some sovereign guarantees of small amounts to ensure that power sector loans are availed as early as possible because the present level of sovereign guarantees is higher than agreed with the Fund. The actual stock of loans is available with the Central Bank.
The consortium of banks led Meezan Bank has differences on interest with the Finance Division: the banks are sticking to Kibor + 0.8 per cent (interest) whereas Finance Division is trying to convince them to accept Kibor + 0.7 per cent.
A couple of days ago, Minister for Power and Petroleum, Omar Ayub told Business Recorder that expensive power sector loans are being replaced with Sukuks which will certainly lessen the financial impact on the economy.
An official told this scribe that Auditor General of Pakistan has conducted audit of Rs 200 billion loans recently been acquired from Islamic banks and paid to the power sector entities to avoid any legal complication in future like what was faced with respect to Rs 480 billion circular debt retired by the PML-N government in June 2013.
Under the Fiscal Responsibility and Debt Limitation Act of 2005, fresh guarantees should not exceed more than 2% of the national GDP in any fiscal year. Another insider told this correspondent that the amount of interest of Rs 10 billion per annum against new loans will be passed on to the consumers at the rate of Paisa 11 per unit in addition to existing Paisa 43 per unit, totaling Paisa 54 per unit.
Of the total Islamic loans of Rs 200 billion desired to be raised, payments will have to be made to PSO on account of payment for fuel supplies through Hub Power Company (Hubco), Kot Addu Power Company (Kapco) and Generation Companies (Gencos) in addition to payments for RLNG. Further, payment on account of energy to coal-fired power plants will be made. Payment for capacity to nuclear power plants and Wapda to discharge their balance liabilities towards NHP arrears of the province against Wapda''s invoices to CPPA-G will be also made. Balance payments will be made to IPPs against their outstanding capacity payments.
Power sector''s performance during the first financial year of incumbent government remained dismal as volume of receivables increased by over 27 per cent to Rs 1.145 trillion in June 2019 from Rs 896.15 billion in June 2018. From July 2018 to June 2019 total billing was recorded at Rs 1.52775 trillion whereas the collection was just Rs 1.251 trillion.
