Efforts afoot for timely payment to Chinese power companies

ISLAMABAD: Prime Minister Secretariat has stepped up pressure on Power Division to expedite process 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, top official told The News.

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

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

“Yes, all the stakeholders such as Law Division, Planning Commission and Finance Ministry have submitted their comments on the summary that Power Division had sent to them seeking their input for setting up the revolving fund to keep Chinese project from the adverse impacts of circular debt. All the stakeholders had agreed with our proposal to set up the revolving fund of Rs20 billion which will ensure the timely monthly payments to the four projects that include coal based Port Qasim Power Plant, coal based Sahiwal Power Plant, Engro Thar and UEP wind power plant,” joint secretary (Power) Zargham Eshaq Khan told The News.

“We are on the toes on the subject knowing the sensitivity of the issue and now the Power Division will soon move summary with inputs from all stakeholders to the next meeting of federal cabinet for approval of the revolving fund.”

There has been no relief in liquidity crisis even after the fiscal year 2017-18 ending June 30, as circular debt continues to stay very much there at Rs1.032 trillion (payables of Rs499 billion and Rs533 billion loans of power sector parked in PHPL).

Mr Khan told The News that payables that earlier stood at Rs547 billion have now tumbled to Rs499 billion after offloading the liabilities of Rs48 billion. However, the loans of the power sector have jacked up to Rs533 billion parked in PHPL (Power Holding Private Limited). He also disclosed that the receivables from the private sector have risen to Rs638 billion.

Mr Khan also said that major amount of Rs89 billion is also part of the circular debt only because of the 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 the circular debt.

The documents, however, available with The News also paint the bleak picture unfolding that so far in first 9 months of the current financial year ending on June 30, a huge amount of Rs60 billion electricity has been stolen and when the outgoing year finishes, the loss will surge to Rs85 to Rs90 billion.

More importantly, the documents also unveil that to cope with this kind of inefficiency and overcome the gap of Rs90 billion loss in the head of theft alone, the overbilling of Rs1-1.5 billion per month is extended to the legitimate consumers every month. The documents also show that the recovery has reduced to 89 percent so the power sector sustained the loss of Rs132 billion. “This means that more generation of electricity means more increase in circular debt.”