PUBLIC TO PAY ENERGY SECTOR'S DEBT

SHAMIM RIZVI
(feedback@pgeconomist.com)

Jan 30 - Feb 5, 2012

The PPP led government has taken unprecedented pro-people decision, which would add another feather in its cap in its endeavor to serve the people specially the poor ones of Pakistan.

It has decided to raise a loan of Rs163 billion from commercial banks to clear the outstanding amounts of the independent power producers (IPPs) in order to overcome their financial difficulties, which were adversely affecting their performance.

It has also decided that the electricity consumes will pay the interest of this loan, which comes to a whopping amount of Rs20 billion.

The economic coordination committee (ecc) of the cabinet in its meeting on Friday last week with the federal minister for finance, Dr. Hafeez Shaikh, in the chair approved the debt to ease out the circular debt in the energy sector to increase the thermal power generation by issuing term finance certificates (TFCs), which would be purchased by the commercial banks under sovereign guarantees, but interest charged by the commercial banks will be passed on to the consumers. With the existing interest rates, the amount would come to about Rs20 billion a year.

The power tariff will be increased by about 2.6 percent, an expert calculated. It would be but a stark cruelty to the masses. This is not the way to run the country and the economic policies. The government's economic wizards are simply penalizing the innocent masses. Instead of further burdening the honest consumers, this amount could easily be collected by controlling the power thefts.

An official who attended the ECC meeting confided to this scribe that by this decision the government has not only helped the IPPs but also helped the commercial banks who were loaded with surplus cash as demand from the industrial sector had declined a lot.

Officially briefing the reporters about the decisions taken in the ECC meeting, an official explained that the government would extend the sovereign guarantee against the Rs160 billion TFCs. The government will pick up the liabilities against the capacity charges of the IPPs and will park them at the power holding company (PHC). The PHC will arrange the said amount through TFCs from the local commercial banks on the interest rate yet to be decided between the ministry of finance and the commercial banks.

The ECC also decided that the commercial banks would also be asked to continue extending credit lines to the IPPs.

Replying to a question, the official said TFCs would be of 5-year duration and the repayment would be made by electric power distribution companies (Discos). Two years will be grace period to pay the amount with interest. The discos will open a separate account to collect the revenues to deal with the financial payments.

The ECC also approved a $200 million loan for Sui southern besides a loan of $100 million from the World Bank with five percent interest and 6.5 percent exchange coverage fee. The ECC meeting also allowed the purchase of 100,000 tons of sugar from the domestic producers.

On the summary moved by the ministry of industry, the ECC directed the Zarai Taraqiati Bank to resume loaning facility to farmers with immediate effect.

While reviewing the sugar situation in the country, the ECC directed the chairman trading corporation of Pakistan (TCP) to make the payments to all the millers expediently and make sure to avoid any laps in it. The TCP chairman who was present in the meeting told the members that eight millers have already been paid and rest of the millers shall be positively paid by the end of the month.