ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet on Friday rejected a move by the Power Division for payment of Rs200 billion to various public and private sector entities without a well defined and written criterion.

Informed sources told Dawn that the ECC meeting, presided over by Adviser to the Prime Minster on Finance & Revenue Dr Abdul Hafeez Shaikh, directed the Power Division to set some principles and criterion in writing for payment of Rs200bn to various power sector entities affected by over Rs2 trillion circular debt and come back for approval at a special follow up meeting on Saturday.

These sources said the Power Division had come up with a summary on disbursement mechanism which did not satisfy Dr Shaikh who found them to be vague. He asked as to who prepared the document for allocation of funds to various entities and who was responsible for payments.

The sources said Secretary Power Division Irfan Ali explained that he — being the principal accounting officer (PAO) of the division — was entrusted with the responsibility for payment of funds to various entities on the basis of power purchase agreements (PPAs) on the payment schedule proposed by the Central Power Purchasing Agency (CPPA).

Dr Shaikh observed that if PAO had to take such decisions then there was no need for the matter to be taken up by the ECC which was not a forum for allocation of funds and its decisions have to be based on some documentation. He said the ECC could settle some principles based on documentation that provide clarity to all as it involved public money.

He advised the Power Division that ECC would be ready to approve any formula which was based on some principle even if it was on the basis of some past practice.

The Power Division had proposed payment of Rs200bn recently raised through Islamic Sukuk instruments to Pakistan State Oil, generation companies of the government, gas companies and independent power producers. It said it had prepared the criteria to disburse in a transparent manner which stipulates that all IPPs will be paid in the manner that after disbursement of these funds the total payable to these IPPs remains equal or higher to the reported excess profits or systemic problems referred to by the investigation committee led by former Securities and Exchange Commission of Pakistan chief Muhammad Ali.

Such funds would later be adjusted after a final decision by the competent authority on the outcome on the basis of investigation report and renegotiation process with IPPs. In doing so, the energy purchase price inclusive of GST will be given preference, so that the fuel stocks remained at their highest level, and payments to RLNG and coal-fired plants would also be given preference.

Also, it proposed that capacity payments would be paid to the IPPs to the extent of their debt servicing and taxation requirements for the quarter ending June 2020.

The Power Division had also suggested that payments to Water and Power Development Authority (Wapda), Chashma Nuclear and partial settlement of import of power from Iran and National Transmission & Despatch Company transmission charges would be disbursed against capacity payments. All this arrangement would be strictly limited to payment of Rs200bn.

As per the existing disbursement methodology, CPPA-G is maintaining the overall percentage based on billing and payment since July 2017 and would continue to be followed for other disbursements. The head of the ECC felt the proposed arrangement appeared to be vague and departure from normal process and had to be well defined.

Published in Dawn, May 30th, 2020