Govt approves Rs200 billion sukuk to ease circular debt

ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet on Tuesday approved the launch of a Rs200 billion sukuk to help clear part of mounting circular debt in the power sector, a statement said.

The ministry of power informed the ECC, chaired by finance minister Asad Umar that total circular debt stood at Rs1.614 trillion at the end of 2018.

“ECC after detailed discussion allowed the ministry to proceed with the raising of syndicated Islamic term finance facility of Rs200 billion for which term sheet had already been received from a consortium of Islamic banks,” the statement added. The government picked six Islamic banks to arrange the maiden sukuk issuance with Meezan Bank leading the syndicate. Banks would use diminishing musharka or ijara for the transaction.

A breakup shows the government owes generation companies (GENCOs) Rs76.318 billion for oil and Rs46.085 billion for gas, Independent Power Plants’ (IPPs) Rs264.982 billion for residual fuel oil, Rs56.687 billion for gas, and Rs85.796 billion for RLNG, WAPDA Rs169 billion for hydel, IPPs to the tune of Rs 13.739 billion, Rs2.930 billion, Rs4.750 billion, and Rs 34,876 billion for wind, hydel, solar, and coal respectively, IPPs Rs29.991 billion for nuclear generation, and allied office NTDC Rs20.192 billion.

In the second category of Energy Purchase Price (EPP), the outstanding amount stood at Rs393 billion, while in the third category the government has to pay Rs323.428 billion under the head of capacity charges, whereas others liabilities stood at Rs13.384 billion and the amount to be paid as interest totalled Rs77.212 billion. Against these piles of circular debt the total receivables of power sector stood at Rs1,041 billion. Out of the total amount of receivables, the federal government had to recover an outstanding amount of Rs10.4 billion, the Azad Jammu & Kashmir government Rs51.1 billion, Federally Administered Tribal Areas Rs14.8 billion, Balochistan (agriculture subsidy) Rs238.4 billion, K-Electric Rs65.2 billion, provincial governments Rs48.5 billion, private sector defaulters of DISCOs Rs450.8 billion and IPPs Rs1.8 billion. The subsidies for power sector stood at Rs170.4 billion and outstanding loans of Power Holding Company were Rs607 billion.

The statement said ministry of national food security & research proposed that PASSCO be allowed to export remaining 0.5 million tons surplus wheat to create physical and fiscal space for new wheat procurement. Out of this surplus, 0.4 million metric tons may be exported through sea route and 0.1 million metric tons through land route. The statement said ECC approved food ministry’s proposal for allowing the export of 0.5 million tons of surplus wheat/wheat products by PASSCO for which it had received bids on January 11, 2019.

“The decision was made keeping in view the rising prices of wheat in the international markets, sufficient available stocks (1.7 million tons) and the predictions of a good crop in the current crop season,” it added.