Govt provides Rs200bn subsidy to power sector to curtail circular debt

ISLAMABAD: The Ministry of Finance on Thursday provided a Rs 200 billion subsidy to cash bleeding power sector to erase the monster of the circular debt which had mounted to Rs 2.7 trillion by the latest available estimates.

After clearance of this amount, the remaining circular debt of the power sector was expected to stand at around Rs 2.5 trillion till end of ongoing month (December 2023). “This clearance of Rs 200 billion will help both the power and gas sector to settle their circular debt as the amount will be paid to gas companies in order to settle their circular debt to the tune of Rs 80 billion” top official sources confirmed to The News here on Thursday. One top official said that the Ministry of Finance granted its assent on Wednesday evening and the amount was provided to the concerned ministry on Thursday.

The Economic Coordination Committee (ECC) of the Cabinet considered the summary on December 19, 2023 regarding settlement of payables to Government Owned Power Plants (GPP) at par with IPPs so the release of Rs 262.075 billion to public sector power plants was granted through Technical Supplementary Grant (TSG).

The Ministry of Power had made request for approval of Technical Supplementary Grant of Rs262.075 billion for the second quarter payment of Rs131.035 billion to Government Owned Power Plants GPPs, i.e. Rs26.782 billion to Genco-11; Rs2.965 billion to Genco-111; Rs83.638 billion to Wapda; Rs16.015 billion to Quaid-e-Azam Thermal Power (RLNG) and Rs1.635 billion to Quaid-e-Azam Solar Power. For 3rd quarter, payment of Rs131.040 billion to Government Owned Power Plants GPPs i.e. Rs26.787 billion to Genco-11; Rs2.965 billion to Genco-111, Rs83.638 billion to Wapda; Rs16.015 billion to Quaid-e-Azam Thermal Power (RLNG) and Rs1.635 billion to Quaid-e-Azam Solar Power.

The ECC granted its approval and directed the utilization of funds through this arrangement as the GPP would accord priority to clearance of their foreign relent loans and cash development loans.

For CFY2023-24, a budgetary allocation amounting to Rs127 billion has been made for K-Electric tariff differential subsidy arrears. It is imperative that Rs57 billion would be immediately released to CPPA-G as advance subsidy to ensure liquidity of the power sector, for which the adjustment would be made.