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May 30, 2020

ECC witnesses heated debate on how to use Rs200b generated under sukuk bond

ISLAMABAD: The Economic Coordination Committee (ECC) meeting witnessed heated debate as top mandarins of Finance Ministry asking for the usage of the Rs200 billion generated through Sukuk bonds for the sustainability of power sector for next three months.

Power Division pleaded that the cash flow situation has alarmingly deteriorated and so it is unable to run the power sector on sustainable basis for next three months.

However, the Finance Ministry’s top guns were of the view that Islamic Sukuk bond-II of worth Rs200 billion was launched for the purpose of off-loading of old payments. Now the ECC would again meet today (Saturday) to finalise as to how the amount of Rs200 billion is to be used.

The sources in Finance Ministry also argued if the dues of the IPPs are not partially paid, they may not be in a position to run their plants which may expose the country to loadshedding amid increasing mercury level. The data which is available with The News shows that government needs to pay Rs600 billion to IPPs and if it fails to offload some of payments of private power houses, they in return can close down their operations which will result in the severe outages in the summer season.

According to the top sources, one of the top men of the Power Division pleaded the case in ECC meeting saying that the recovery of invoiced electricity bills has tumbled from 92 percent in February 2020 to almost 50-60 percent as of today mainly because of the freezing of quarterly tariff adjustment and monthly fuel price adjustment for the last 6-7 months. And on top of that Discos had to suspend its anti-theft campaign because of the situation arisen out of lockdown.

The sources said that he also pitched another argument saying that in March-April, the demand of electricity has also tumbled because of lockdown in the wake of COVID-19 spread as in that specific period, there was no industrial and commercial activities in the country. And more importantly all factors also contribute more surge in the circular debt which has now swelled to over Rs2.1 trillion (Rs1200 billion as payables and over Rs900 billion as loans parked in PHPL). They, however, responded when asked how much loss in toto power sector will experience saying that it is an evolving situation and no one knows for how long COVID-19 phenomenon will last.

He said that Power Division is under instruction not to collect the electricity bills up to 300 units from masses for three months and after the said time, it will start collecting the same. And more importantly, people are not depositing their bills and owing to these factors, massive reduction in recovery Power Division is facing.

And on account of all these factors, Power Division is facing unprecedented cash flow situation which is why it badly needs Rs200 billion to run the power sector on sustainable basis for next three months and then it will be in a position to attain the required cash flow situation by restoring the recovery at earlier position of 92 percent.

The sources also shared the information saying that a committee headed by Federal Minister for Planning and Special Initiative Mr Ashad Umar, comprising Advisor to the Prime Minister on Institutional Reforms and Austerity Dr Ishrat Husain, Energy Minister Mr Omar Ayub Khan and Secretary Finance and Secretary Power Division was constituted on how to handle Rs200 billion generated through Sukuk bond-II. The committee was asked to make a template showing the Power Division’s needs for cash flow in next three months.

The sources in Power Division said that they are now in the process to make a template with the input of CPPA (Central Power Purchase Agency) comprising demand of fuel and volume of debt payments in next three months that will be presented in today’s ECC meeting.