3:09 AM
ISLAMABAD: On top of the continuously increasing tariff, electricity consumers will also have to pay the cost of interest on power sector loans.
A decision to that effect was taken at a meeting of the Economic Coordination Committee (ECC) of the cabinet presided over by Finance Minister Abdul Hafeez Shaikh on Friday.
It asked the ministry of water and power to issue binding policy guidelines to the National Electric Power Regulatory Authority (Nepra) to increase power tariff so that the interest could be recovered from consumers.
It may be mentioned that Nepra has so far been refusing to endorse the move.
The ECC ordered procurement of 100,000 tons of sugar in addition to the already committed 378,000 tons to ‘help’ mills solve their cash flow problems and clear their bank loans.
The committee approved a Rs60 billion loan package for the two gas utilities to help them reduce one of the world’s largest system losses of over 11 per cent and reduced sales tax on tractors apparently to oblige an influential agricultural lobby.
The committee decided that a part of the receipts from increased power tariff should be placed in a special account to enable distribution companies to pay interest to banks against the revenue collateral.
It did not work out how much the electricity tariff would be increased when Nepra would implement the decision.
Under the decision, the government will take over Rs160 billion power sector loans and sell them to a consortium of commercial banks in the form of five-year term finance certificates (TFCs) to be issued by the Pakistan Power Holding Company, a government subsidiary, against sovereign guarantees of the federal government.
The banks will charge about 12.6 per cent interest on the loans.
The decision will partially dissolve a Rs404 billion circular debt Wapda’s power companies owe to the IPPs and fuel suppliers.
The required Rs160 billion loan will immediately be arranged to make capacity payments to the IPP and fuel suppliers. Of the Rs404 billion payables, Rs239 billion is electricity price, Rs115 billion capacity charge of IPPs and Rs49 billion interest cost.
The payments to the IPPs and fuel suppliers will be made thorough book adjustments to reduce receivables from their accounts.
The banks will be instructed to use the book adjustments as ‘debt swap’ and not to reduce credit lines of the IPPs and fuel suppliers against the TFCs because loan repayments would be made by the government through the distribution companies.
GAS COMPANIES: The loan package approved for gas utilities includes a foreign exchange component of Rs14 billion.
The government has contracted a $200 million (Rs19 billion) loan with the World Bank for loss reduction in the Sui Southern Gas Company (SSGC) at an interest rate of 3.8 per cent to be repaid in 25 years, including five years of grace period.
The SSGC has agreed to acquire the loan from the government at a re-lending interest rate of 11.8 per cent — interest rate of five per cent plus foreign exchange risk cover of 6.8 per cent — and repay the entire amount in five years, with the condition that there would be no pre-payment penalty.
The meeting was informed that another $200 million loan would be acquired from the World Bank on similar terms for the Sui Northern Gas Pipelines.
TRACTORS: The committee endorsed a decision of the prime minister to reduce general sales tax on tractors from 16 to five per cent.
The ECC had earlier rejected the demand from tractor manufacturers who claimed their sales had dropped becauseof the tax imposed in April last year.
The chairman of the Federal Board of Revenue told journalists recently that the industry had conceded that the sales had dropped in anticipation of the tax reduction.
Subsequently, a committee led by Kashmir Affairs Minister Manzoor Wattoo gave a commitment to the manufactures that the tax would be reduced and the decision was approved by the prime minister.
The ECC constituted a committee comprising the Prime Minister’s Adviser on Agriculture and Water Resources Kamal Majidullah and the FBR chairman to finalise a procedure for gradually increasing the tax from five to 16 per cent in three years.
SUGAR: The decision to purchase an additional 100,000 tons of sugar was taken to facilitate mill owners to pay off bank loans and clear dues of farmers.
LOW QUALITY GAS: The meeting approved in principle a policy of incentives prepared by the petroleum ministry for fast-track development of low heating value gas for use in the power sector through additional bonuses and tax holidays.
However, it referred the case to the law division for legal opinion because some participants said it did not fall under the jurisdiction of the ECC after the 18th Amendment that had empowered the provinces to take such decisions through the Council of Common Interests.
TURKMEN GAS: The committee considered a gas sale and purchase agreement to be signed with Turkmenistan for import on the basis of a ‘one-page’ pricing understanding signed during a recent visit to Islamabad by the Turkmen president and constituted a committee to examine the formula.
It also asked the Zarai Taraqiati Bank to immediately resume the loaning facility for farmers.
Posted in: NATIONAL
