Revolving fund for four Chinese power projects: Consumers to pay for debt servicing of Rs20 bn loan

ISLAMABAD: The power consumers will also pay the amount in the head of debt servicing for the Rs20 billion loan that will be used in revolving fund to ensure timely payments to four Chinese power projects for keeping them away from the adverse impacts of circular debt.

A summary signed by Rizwan Memon, Secretary Power Division, has been dispatched to the cabinet seeking approval for setting up the revolving fund of Rs20 billion to provide ease to the Chinese projects established under the CPEC umbrella.

The Central Power Purchasing Agency (CPPA) will get revolving account of Rs20 billion opened through Power Holding Private Limited (PHPL) and the amount will be arranged through the loan most probably from the National Bank of Pakistan (NBP) and the cost of servicing will be paid by the electric power consumers. In the summary, a copy of which is available with The News, it has been clearly written that Nepra will be asked to include debt servicing of the Rs20 billion loan to be arranged for setting up the revolving fund in the tariff determination of Discos to the extent of their contribution towards revenue shortfall created.

Chinese companies had earlier threatened the government of Pakistan that they will halt their future investment in power sector if they were not paid on time by not keeping them away from the adverse effects of circular debt.

Keeping in view the sensitivity of the issue, the process was expedited for setting up the revolving fund of 22 percent of the monthly billing and capacity charges to ensure the timely payments to four electric power projects installed under CPEC to avert the wrath of Chinese companies, a top official told The News.

Interestingly, under the CPEC framework, the government of Pakistan had extended the assurance to China that Chinese investors in power sector under CPEC will not be exposed to delayed payment on account of the liquidity crisis in power sector.

“Yes, all the stakeholders such as Law Division, Planning Commission and Finance Ministry have submitted their comments on the summary that Power Division after their input has sent it to cabinet seeking approval for setting up the revolving fund to keep Chinese projects from the adverse impacts of circular debt.

All the stakeholders had agreed to our proposal to set up the revolving fund of Rs20 billion which will ensure timely monthly payments for the four projects that include coal-based Port Qasim Power Plant, coal-based Sahiwal Power Plant, Engro Thar and UEP windpower plant,” Joint Secretary Power Division Zargham Eshaq Khan told The News.

There has been no relief in liquidity crisis yet as circular debt continues to stay very much there at Rs1.066 trillion (payables of Rs566 billion and Rs500 billion loans of power sector parked in PHPL).

In the presence of such a huge circular debt, it was not possible for the authorities to ensure timely payments to the said four Chinese projects. Zargham Eshaq also said that major amount of Rs89 billion is also part of the circular debt only because of delay of one and a half years in notifying the tariff of electricity and unless and until the said loss is compensated it will continue to be the part of circular debt.