Islamabad:
Pakistan on Wednesday postponed the approval of four key agreements between the government and K-Electric, the country’s largest integrated electricity distribution company. This decision came about due to objections expressed by some cabinet members during the meeting of the Economic Coordinating Committee of the Council of Ministers.
The drafts under discussion included the Power Purchase Agency Agreement (PPA), the Interconnection Agreement, the Differential Tariff Subsidy Agreement and the Mediation Agreement, according to the finance ministry. However, the final approval was postponed due to several comments from the members of the Greek Cypriot Council, resulting in the need for a new discussion.
“The CYC discussed the draft agreements in detail and asked the Energy Directorate to provide further information and detailed work to clarify the comments made by the CYC,” the Finance Ministry press release said. The matter will be revisited at a later meeting after additional information is provided.
The Department of Energy explained that the agreements were prepared based on the recommendations of the task force formed by the prime minister to deal with issues between the JV and various government agencies. If approved, these deals will resolve long-standing issues by streamlining regular payments to prevent cyclical debt from rising, according to the finance ministry.
Prime Minister Anwaarul Haq Kakar had recently pledged to resolve the ongoing dispute between KE and the government during his visit to the Gulf countries. Saudi Arabia-based Aljomaih Group is KE’s largest single shareholder. The meeting of the Greek Cypriot Council had been called on the order of the Prime Minister to approve the draft agreements.
A senior Treasury official said the ECC would meet again, possibly on Friday or early next week, with hopes of considering members’ comments through additional information from the Energy Department.
An additional concern discussed during the meeting was the need for KE to add additional generation capacity to meet demand, along with timely delivery of agreed subsidies. There has been a proposal to offer the Jamshoro power station to KE, but this cannot go ahead without privatizing the plant which was set up with public funds.
Reading K-Electric sees no impact of inflation on power bills
The four agreements under review are aimed at addressing power supply problems, providing subsidies and handling KE’s electricity purchases from the Central Energy Purchasing Agency. The current arrangement lacks legal backing and these agreements are vital to formalize the relationship between the JV and the government.
In 2010, a power purchase agreement was signed between KE and NTDC for the sale and purchase of up to 50 MW of power. The agreement remained in force for five years till 25 January 2015. However, the Sindh High Court issued a restraining order against the government and NTDC, preventing it from interfering with the PPA. The court directed the NTDC to continue supplying electricity to the JV.
Sources said the Finance Directorate has raised objections to the Energy Directorate’s proposal to authorize the finance ministry to sign the differential tariff subsidy agreements on behalf of the federal government. The finance ministry maintained that electricity matters fall under the purview of the Electricity Directorate and matters related to generation, transmission and distribution, including provision of subsidies, remain under the mandate of the Electricity Directorate. The Treasury Department, while supporting draft settlement agreements, refused to sign off on the agreement on behalf of the federal government. He was of the opinion that these agreements should not impose additional financial burdens beyond the subsidies provided for in the budget.
On inflation, the CEC was briefed by the Ministry of Planning, stating that inflationary pressures remain, although they have receded from a peak of 38% in May 2023. Recent adjustments in energy prices have interrupted the downward trajectory, causing a bounce of inflation in November 2023 to 29.2%.
Published in The Express Tribune, December 14u2023.
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