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Finance ministry refuses to support Rs50b grant for projects under CPEC

18 Apr, 2022
<p>Power Division had sent a summary to the Finance Ministry in this regard for comments. The summary is yet to be considered by the new ECC, to be constituted after the new Cabinet takes oath. AFP/File</p>

Power Division had sent a summary to the Finance Ministry in this regard for comments. The summary is yet to be considered by the new ECC, to be constituted after the new Cabinet takes oath. AFP/File

The Ministry of Finance (MoF) has refused to support supplementary grant of another Rs50 billion for the power projects established under China Pakistan Economic Corridor (CPEC), well informed sources told Business Recorder.

Power Division had sent a summary to the Finance Ministry in this regard for comments. The summary is yet to be considered by the new ECC, to be constituted after the new Cabinet takes oath.

On April 15, 2022, Finance Division wrote to the Power Division that earlier it was given to understand that the GoP at a higher level will engage CPEC IPPs to consider voluntary reduction in the tariff, as well as, excess profitability issue in line with settlement agreed with other IPPS. However, pending resolution of the issue with a view to address liquidity issues of these power projects, the Finance Division with the approval of ECC/ Cabinet has already provided an amount of Rs.50 billion to the Power Division.

Finance Division maintained that during a meeting with the IMF, the issue was raised specifically regarding different treatment in this case vis-à-vis other IPPs.

The sources said, Finance Division has requested the Power Division to provide the updated position during the meeting of the ECC.

Finance Division has further stated in view of tight fiscal space arising due to significant shortfall in recovery of Petroleum Levy and Sales Tax on petroleum products’ as well as, provision of subsidy on price differential claims and reduced rates of consumer end electricity tariff, it does not support the proposal for a supplementary grant of another Rs.50 billion.

Cabinet Division has also asked Power Division to submit the summary afresh for grant of Rs 50 billion supplementary grant for payment to CEPC projects, after seeking approval from the new Minister- in-Charge.

The cash strapped Power Division has sought Prime Minister’s help to recover Rs 111 billion from provinces sans Azad Jammu & Kashmir.

The Power Division has initiated a country wide recovery campaign to enhance recoveries of Discos in order to improve their financial health and to enable them to timely pay-off power purchase cost to avert unnecessary accumulation of supplementary charges which increase in the circular debt. For this purpose, Power Division has approached the concerned Secretaries and Federal Ministries/ Divisions, as well as, the Chief Secretaries of the Provincial governments for payment against the outstanding dues indicating the huge recoveries receivables of Discos against their respect departments.

Power Division maintains that the receivables on one hand are creating cash constraints for the Discos and on the other impacting cash flows/ performance of Discos. This trend has placed a heavy toll on performance of power sector, especially in shape of ever-increasing circular debt, which has severely impacted socioeconomic development in the country.

Power Division has also proposed that necessary instructions may be imparted by the Prime Minister’s Office to the Federal Ministries/ Divisions and Provincial Governments for clearing their respective outstanding bills of electricity and for ensuring timely payment of electricity dues in future.

The story was originally published in Business Recorder on April 18, 2022.