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The Power Division is seeking Rs134.8 billion in TSG to settle IPP debts

ISLAMABAD: Official sources told Business Recorder that the Power Division has requested a Technical Supplementary Grant (TSG) of Rs134.783 billion to clear the outstanding agreed amount of 20 Independent Power Producers (IPPs) by December 3, 2021. M.s Hubco and Kapco are among the 20 IPPs, with M.s Hubco and Kapco belonging to the pre-1994 Generation Policy, six to the 1994 Generation Policy, and 12 to wind, solar, and bagasse.

In August 2019, the Government of Pakistan (GoP) established a Committee for Electricity Industry Audit, Resolution, and Future Roadmap to investigate concerns in the power sector, particularly alleged greater profits earned by IPPs, and to suggest a course of action. In March 2020, the Committee presented its report, which highlighted issues in the power sector. The Federal Government formed a new Committee in response to the Committee’s recommendations, based on the Cabinet Committee on Energy’s (CCoE) decision to begin discussions with the IPPs (Negotiation Committee).

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The sources said following successive rounds of discussions with the IPPs, the Negotiation Committee submitted its complete report to CCoE, which approved the constitution of another Committee (Implementation Committee) on September 24, 2020 for the implementation of the Memorandum of Understandings (MoUs) and the recommendations in the report. The Implementation Committee submitted payment mechanism in its report.

The CCoE and Economic Coordination Committee (ECC) considered the report and approved the payment mechanism’ to IPPs, in meetings held on February 8, 2021 which was ratified by the Cabinet on February 9, 2021. In pursuance to the approved mechanism, first instalment of 40% amounting to Rs.89.860/- billion was made on June 4, 2021. Accordingly, second instalment of 60% amounting to Rs134.783/- billion is due within 6 months of first instalment as per approved payment mechanism, i.e., December 03, 2021.

The outstanding amount as duly verified by CPPA was Rs224.638 billion, of which Rs89.860 billion, 40 per cent, as first instalment has already been paid to the IPPs. Of this, Rs29.951 billion i.e. 1/3 was cash, PIBs and Sukuk each, respectively.

The break-up of Rs 134.783 billion, i.e., 60% of total amount as second instalment is as follows: (i) Hubco (RFO)- Rs 34.789 billion; (ii) Kapco (gas/ RLNG&RFO, Rs 59.4 billion; (iii) Rousch (gas/RLNG)- Rs 8.533 billion; (iv) Fauji (gas/ RLNG) Rs 2.637 billion; (v) Pak Gen Power (RFO)- Rs 9.8 billion; (vi) Lalpir Power (RFO)- Rs 9.289 billion; (vii) KEL (RFO)- Rs 2.984 billion; (viii) Saba Power (RFO) 1.078 billion; (ix) FFC Energy (wind)- Rs 2.072 billion; (x) ACT(wind)- Rs 0.978 billion; (xi) Artistic Energy ( wind)-Rs 1.362 billion; (xii) Harapa (Solar) – Rs 0.095 billion; (xiii) AJ Power ( solar) –Rs 0.040 billion; (xiv) RYK Mills( Bagasse)-Rs 0.314 billion; (xv) JDW Sugar Mills Unit-II (bagasse) Rs 0.696 billion; (xvi) JDWQ Sugar Mills Unit-III( bagasse)- Rs 0.598 billion; (xvii) Hamza Sugar Mills (bagasse ) –Rs 0.093 billion; (xviii) Thal Industries Corporation( bagasse)-Rs 0.067 billion; (xix) Almoiz Industries Limited (bagasse) Rs 0.0138 billion; and (xx) Chanar Energy Limited (Bagasse ) Rs 0.0486 billion.

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The sources said, of Rs134.783 billion, Rs44.297 billion will be paid in cash, PIBs and Sukuks each. According to Power Division, since the allocation of equivalent amount has already been made in the demand No.45 of Finance Division under the head A051 of ‘subsidies for the payment of second instalment (60%) to IPPs in the budget for FY-22’; therefore, the case is to be referred to ECC of the Cabinet for approval of Technical Supplementary Grant (TSG) for timely release of second instalment.

The sources maintained that release on a similar case in 2013 was made in Federal Miscellaneous Investment head A014302-All102 instead of Subsidy Head A051. Foregoing in view, ECC of the Cabinet has been requested to consider and approve the Technical Supplementary Grant of Rs134.783/- billion for payment to IPPs as second instalment as per approved payment mechanism so that the amount may be transferred from demand No-45 (Head Subsidies) of Finance Division to the Demand No.34 (Head. Investment A014 of Power Division).

Power Division argued that the Finance Division has an amount to the tune of Rs118 billion under subsidy to Wapda/ Pepco on account of inter-Disco subsidy and Rs 136 billion under IB3109 (lump provision of subsidy).

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