Islamabad:
As a significant portion of Pakistan’s government debt includes loans to the power sector, policymakers have emphasized the importance of privatizing state-owned power producers to rein in the relentless cyclical debt.
They expressed serious concerns that there was a significant amount of foreign loans outstanding against the state-owned power producers (GPPs), which would have to be recovered from the payments proposed to be made to these generating companies (Gencos).
Sources in the Ministry of Energy (Electricity Department) pointed out that Gencos owed a lot of debt and considering that privatization should be considered to ease the cyclical debt burden of the power sector.
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However, the Electricity Department told a recent meeting of the Economic Coordination Committee (ECC) that there were many challenges standing in the way of privatizing Gencos.
The meeting was informed that the operation and maintenance of Nandipur Power Plant had been outsourced to a Chinese company, however, Guddu Power Plant was essential for the stability of the system.
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The Directorate of Economic Affairs informed the meeting participants that there was a significant amount of outstanding foreign loans, which had been re-lent to the state-owned power producers, which would have to be recovered from the proposed payments.
Policy makers were of the view that since most of the national debt consisted of loans given to the power sector, the Energy Department should come up with a comprehensive plan to deal with the accident.
The ECC directed the Directorate of Energy to present a comprehensive presentation on the issues related to the energy sector along with viable recommendations.
The meeting was informed that the Electricity Department had submitted a summary to the ECC on March 30, 2022 seeking approval to clear Rs 444.5 billion of past dues of state power plants.
Supplementary grant of Rs 182.465 billion to Pakistan Atomic Energy Commission, Water and Power Development Authority (Wapda) and National Power Parks Management Company Limited (NPPMCL), under the payment mechanism already approved for independent power producers ( IPP). was accordingly approved and subsequently released.
In the current financial year 2023-24, the government has allocated a one-time subsidy of 262.075 billion rupees for the power sector.
In this regard, the Finance Directorate was taken into account. It was agreed that out of the Rs 262 billion, an amount of Rs 131.035 billion can be released in the second quarter of FY24 and the remaining Rs 131.040 billion in the third quarter.
The Electricity Department has asked the ECC to approve a technical supplementary grant of Rs 252.075 billion under the investment category and make it available for infusion to the electricity distribution companies.
Out of the second quarter payment of Rs 131.035 billion, Rs 26.782 billion was required to be given to Genco-II, Rs 2.965 billion to Genco-III, Rs 83.638 billion to Wapda, Rs 16.015 billion to Quaid- e-Azam Thermal Power Station (based on the regasified liquefied natural gas – RLNG) and Rs 1.635 billion on the Quaid-e-Azam Solar Power Plant.
For the third quarter payment of Rs 131.040 billion, it was proposed to give Rs 26.787 billion to Genco-II, Rs 2.95 billion to Genco-III, Rs 83.638 billion to Wapda, Rs 16.015 billion to Quaid-e -Azam Thermal Power Plant (RLNG) and Rs 1.635 billion on Quaid-e-Azam Solar Power Plant.
The ECC considered a brief submitted by the Department of Power titled “Debt settlement of state power plants at par with IPPs – release of Rs 262.075 billion to public sector power plants through TSG” and approved the proposals.
He directed that while utilizing the funds, PDBs would give priority to clearing foreign loans and cash development loans. He told the Energy Directorate to formulate a comprehensive plan and make a presentation on the issues of the power sector, including its outstanding obligations, with viable recommendations.
Published in The Express Tribune, January 2n.d2024.
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