ISLAMABAD: A special meeting of the Economic Coordination Committee (ECC) of the Cabinet on Thursday cleared a cumulative bailout package of almost Rs300 billion for the power sector to settle immediate liabilities besides allowing compensation against foreign exchange loss to oil marketing companies (OMCs).

The ECC also approved a board resolution of the Karachi Port Trust for extension in the existing free period from five working days to 15 working days for cargo/containers landing with effect from March to April 30.

Under the power sector bailout package, about Rs200bn Islamic sukuk being raised originally for retirement of stock of the circular debt would now be used to meet immediate cash shortfall — fresh flow to the circular debt — of the power sector arising out of the deferment on fuel price adjustment and quarterly tariff adjustments.

The ECC also formally approved the deferment of monthly fuel price adjustment and quarterly tariff adjustments in the electricity bills of the consumers till June as announced by the Prime Minister. The cost of deferment of fuel price adjustment was estimated at Rs61bn until May this year while delay in recovery of quarterly tariff adjustments would cost Rs77bn, the ECC was informed. About Rs60bn would be paid to fuel suppliers and banks for retirement of debt.

In addition, the committee gave a go ahead for Rs100bn Syndicated Term Finance Facility (STFF) on the request of the Power Division for short-term borrowing for 9-12 months from commercial banks to bridge fiscal gap to be caused by stretching out recovery of electricity bills of consumers using less than 300 units per month from three months to nine months. The Ministry of Finance would finance the interest cost for these loans.

Fuel price and quarterly tariff adjustments to be settled through Rs200bn Sukuk

The Power Division also reported to the ECC that bill recoveries of its distribution companies that stood at 91-92 per cent in February had dropped to 62-63pc in March while power demand had plunged by over 40pc because of closure of commerce and industry across the country.

It was estimated that power companies would face a loss of about 10bn electricity units until June but capacity payments would become due to the power plants. To meet this additional fiscal gap, the ECC was requested to provide Rs67bn out of the Prime Minister’s Emergency Fund in three equal monthly installments. It was also reported that because of lockdown and difficulties of the people, the aggressive campaign against theft and non-payment of arrears could not be sustained.

The finance ministry confirmed in a statement that the proposal for funding to the power sector from the economic relief package for mitigating the effect of shortfall was moved by the Power Division to cover the fixed costs of the sector.

The “ECC set up a committee comprising secretary finance, secretary power and adviser to the PM on Austerity and Institutional Reforms to see the impact of slowdown of economic activity on the power sector and firm up the terms of references (TORs) and mechanism that will assist in providing relief to the sector”, it added.

In order to cover up the losses incurred by the Pakistan State Oil (PSO) and oil sector due to the devaluation of rupee, the ECC in principle agreed to a maximum of 60-day period for the adjustment of exchange gain or loss with effect from Mar 1 and directed the Petroleum Division to resolve the issue in consultation with the Finance Division.

The Petroleum Division had requested 60 paisa per liter build up in petrol and diesel prices to meet fresh devaluation losses.

On the proposal sent by energy ministry regarding liquidity requirements of the PSO worth Rs61bn to avoid international defaults during current month owing to over Rs370bn outstanding receivables from different government sector organisations and slow recoveries, the ECC directed secretary finance to consult with the Power Division and help retire some of the PSO’s liabilities.

The ECC approved a total of four technical supplementary grants for the current fiscal year including Rs160 million for the Federal Public Service Commission, Rs1.7bn for the achievement of Sustainable Development Goals Programme, Rs11.483bn for Special Security Division (South) Phase-I and Rs468.2m for Special Communication Organisation.

Published in Dawn, April 10th, 2020