With rise in power tariff, circular debt on the decline

ISLAMABAD: The Cabinet Committee on Energy (CCOE) that met here on Thursday noted that the projected circular debt accumulation is on the decline as the circular debt flow in FY 2020-21 is now projected to be around Rs 440 billion compared to Rs 538 billion in the last fiscal year, primarily due to better DISCOs performance, lower unbudgeted subsidies and the impact of the recently-announced Rs 1.95 tariff increase, a senior official told The News.

“With Federal Minister for Development and Special Initiatives Asad Umar in the chair, the CCOE was told that 44 IPPs have so far agreed on payment mechanism. Besides it, two more wind power plants have agreed and the last one will also agree on payment mechanism before the federal cabinet that meets on Tuesday next week. On payment mechanism, the CCOE has approved recommendations of the Power Division, but there will be another CCOE and ECC meeting to finalize the plan.” The CCOE was briefed about the situation of circular debt from July 2020 to December 2020. The committee notes that the projected circular debt accumulation is decreasing as a result of the circular debt management plan being implemented by the government. The committee appreciated the efforts of the Power Division for regular monitoring of the circular debt situation and directed them to timely issue the monthly data for the committee to review.

As per a press release, the Power Division submitted the summary on payment mechanism and agreement with Independent Power Producers (IPPs). The Power Division informed the committee that out of 47 MoUs, the implementation committee has agreed to the payment mechanism with 44 IPPs. The secretary, Power Division, briefed the committee on the purposed mechanism. Certain members of the committee sought more time to study the proposals in detail. It was therefore decided that the committee would be reconvened on February 8, 2021 for a final decision.

The CCOE has rejected the summary of the Maritime Affairs Division, asking for creating a monopoly of two private LNG terminals, which are not yet visible on the ground, on the existing pipeline capacity and decided that to provide a level-playing field to the new LNG terminal, the existing available capacity will be allocated to any applicant including CNG, meeting the requisite criteria for three months rolling basis till the new terminals achieve a commercial operations date (COD). The CCOE took the decision after it considered a report of the sub-committee constituted on January 18, 2021 regarding allocation of pipeline capacity to new LNG terminals.

The News broke the story in its edition of February 4, 2021 that the move by the Maritime Affairs Division for creating a monopoly of two private LNG terminals, which are not yet visible on the ground, on the existing pipeline capacity has got scuttled as a sub-committee on the issue, headed by Asad Umar, has clearly opposed the move, saying that the concessions proposed to the original terms of the provisional LoI (Letter of Intent) and project guidelines are meant to favour the two companies, Tabeer and Energas, that could leave other players in the market high and dry. The CCOE took the decision based on the findings of the sub-committee headed by Asad Umar, which was constituted to deliberate on the issues regarding allocation of the pipeline capacity to new terminals and formulate recommendations. The sub-committee in its submissions had also said that the concessions granted by the Port Qasim Authority would benefit Energas and Tabeer and, therefore, it would dishonour the judgment of the Supreme Court, passed in the JJVL case.

The sub-committee had said the multiple extensions granted to the companies to execute the final LoI and implementation agreement are also in violation of the public procurement laws. “On this ground, the Supreme Court had cancelled the 4-GAS/SSGC LNG Project, and would likely to do so again if any one consulted the court.” On the face of it, the document said the concessions granted by the Port Qasim Authority (PQA) are against the spirit of the public procurement laws and in violation of the JJVL judgment, so private parties could not be benefited in such a way. The sub-committee members reviewed the proposal of the Maritime Affairs Division, along with the correspondence between the PQA and the prospective LNG terminal developers.