ISLAMABAD: In a major development, Prime Minister Anwaar-ul-Haq Kakar has given the go-ahead to top mandarins of Finance and Energy ministries to submit the circular debt management plan (CDMP) with the IMF in Washington by 5:00 pm today (Friday).
The SIFC also approved that the authorities must send the proposed circular debt management plan to the IMF.
“The directions came from the top man of the country here on Thursday when he took a briefing on this issue of paramount importance from Energy Ministry officials. The top mandarins of the Finance Ministry were also present in the briefing and some observations made earlier by the Finance Ministry on the debt plan prepared by the Energy Ministry were responded with convincing arguments during the meeting,” top officials who attended the meeting held at the PM Office told The News.
“However, some arguments from the Finance Ministry were also accommodated in the high-level meeting headed by the premier. Now Finance and Energy Ministry’s relevant officials are in the process of refining and finalising the circular debt management scheme. The prime minister has asked to finalise it by 5:00 pm today (Friday) so that it could be submitted to the IMF on time.”
“The circular debt reached Rs5.72 trillion as of November 2023 with Rs2.7 trillion in the power sector and Rs3 trillion in the gas sector. Under the circular debt management plan, through a one-time cash injection, the circular debt of Rs1,268 billion (Rs1,013 billion in gas and Rs255 billion in the powers sector) would be settled just in 8 hours.”
The one-time cash transaction, the officials said, would be made under one roof wherein CFOs of all the entities involved in the energy sector would be there to get the amount. They will assure entities at the receiving end that they have got the amount against the receivables and pay for the fuel they procured for power generation and gas supplies to consumers.
“In the past linear payments were made i.e. only receivables were settled through budgeted grants. The circular aspect of debt is where lies the synergy of the scheme in hand. This time grants to central power purchasers will not only adjust their receivables but will also be eventually diverted to pay off power producers. The scheme would not end here and will further ensure that power producers pay their fuel suppliers where gas is a major part supplied to power plants from the SUI network. SUIs eventually settle with the E&P companies who will now be sturdy enough to pay off dividends, which they could not in the past decade owing to their liquidity crisis.”
The one-time transaction, they said, would provide Rs1,013 billion to oil and gas exploration and production companies enabling them to pay dividends to the government and initiate the pace of their slowed-down E&P activities for more indigenous oil and gas production.
It is pertinent to state that despite sustainability mechanisms for state-owned entities supplying gas and power utilities to consumers built through Ogra and Nepra as regulators and governed under their respective statutes, the federal government in the past did inadequate pricing which is its prerogative as per said laws and resulted in revenue shortfalls. The Sui Northern and Sui Southern take the gas from E&P companies like OGDCL, PPL and GHPL, but do not pay to them fully due to inadequate pricing, causing circular debt and making the whole energy sector unviable and unsustainable.
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