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Finance Minister Asad Umar. PHOTO: AFP
ISLAMABAD: The government decided Tuesday to take a loan of 200 billion rupees, promising to repay nearly 30% of the public debt to public property belonging to six banks, which should only mitigate temporarily the financial difficulties of the sector of the economy. 39; electricity.
The Economic Co-ordination Committee (ECC) of the government authorized the summary to lift the borrowings from six Islamic banks without first solving the problem of who would repay the principal and assume the cost of servicing the debt of 200 billion rupees.
At current rates, the annual cost of debt service will be 20 billion rupees.
The government also decided to implement the tried-and-true policy of the Pakistan-Nawaz Muslim League (PML-N) previous government to solve the problem of monstrous circular debt: borrow from commercial banks and park loans with the government. Investment company.
The CEC also decided, in principle, that there would be no gas outage for domestic and commercial consumers during the winter, but the costly, expensive cross-subsidizing mechanism for liquefied natural gas (LNG) has not been decided yet.
Finance Minister Asad Umar chaired the CEC meeting. It approved the granting of sovereign guarantees to the National Electric Park Management Company (NPPMCL) for taking 38 billion rand from commercial banks to meet the financing needs of two LNG power plants in Punjab.
Outstanding circular debt is currently Rs. 670 billion, excluding $ 607 billion that the two previous governments, the PML-N and the Pakistan People's Party (PPP), borrowed from banks but were stationed in the holding company. The total amount of the circular debt amounts to 1,277 billion rupees.
New loans of 200 billion rupees will be obtained from the consortium of Islamic banks against the assets of distribution companies and power generation, according to officials of the Power division. Assets have been identified by DISCO and GENCO.
In the first phase, 100 billion rupees will be mobilized by pledging 43 properties to banks. Officials said that the bank Islami reported providing 20 billion rupees, 5 billion rupees for Al Baraka Bank Limited, 20 billion rupees for Faysal Bank Limited, 8 billion rupees for the Islamic Bank of Dubai, 50 billion for the MCB Islamic Bank Limited and 50 million for Meezan Bank Limited.
Banks will determine the exact amount of funding after carefully reviewing the financial statements of distribution and power generation companies, officials said. The loan will be extended for a period of 10 years and at a six-month floating rate floating rate of the interbank rate offered in Karachi plus 1%. Banks have asked the Ministry of Finance to allocate a budget for the payment of interest.
Officials from the Ministry of Finance said that debt service had not been clarified by part of the Energy Division, although it was mentioned in the summary that the loan could not be recovered from consumers for legal reasons.
A committee composed of the Ministry of Finance, the Electricity Division, the National Energy Regulatory Authority and the Securities and Exchange Commission of Pakistan will finalize the terms and conditions next week.
The six Islamic banks would immediately provide 100 billion rand, while another 100 billion could be obtained as a green shoe option. However, the banks linked their loans on the condition that the companies provide a certificate of no objection to sell their assets to the financiers and the federal government provided guarantees for the rents and declared the SLR of the facility eligible, according to the conditions sheet.
Shahzad Qasim, the prime minister's adviser on energy, plays a role in arranging loans, sources said. Approximately 43 assets of the distribution companies have been transmitted for their market valuation. Ten properties of each of the electricity distribution companies of Peshawar and Multan, six of each of the electricity distribution companies of Gujranwala, Lahore and Islamabad and five of the distribution company Faisalabad will be promised for the lifting of 100 billion loans.
Circular debt accumulates due to high line losses, low collection, non-completion of subsidies, delay in rate determination and government notification.
The Ministry of Finance will provide the government with guarantees for repayment of the loan as well as for interest.
Depending on the conditions imposed by the banks, all members of the board of directors of the distribution and production companies will have to agree to keep the properties in trust for the banks.
NPPMCL Warranties
The CEC also approved RpS 38 billion guarantees to the NPPMCL to organize funds to cover the remaining cost of two LNG plants.
The PML-N government had approved the creation of the power plants of Haveli Bahadur Shah and Baloki, with a combined production capacity of 2,400 megawatts, at a cost of 190.44 billion rupees. The federal government had granted a development loan of 114 billion rupees to the NPPMCL.
The CEC had to issue sovereign guarantees due to a poorly conceived decision by the Finance Ministry led by Ishaq Dar. On June 29, 2017, the Ministry changed the source of funding for the two plants, from the PSDP to the Pakistan Development Fund Limited (PDFL), to underestimate the budget deficit that year. However, the PDFL refused to provide the necessary funds.
The NPPMLC has asked the government to allocate 70 billion rupees to cover the remaining costs of the Haveli Bahadur Shah and Baloki plants. Against this amount, a short-term borrowing of 32.8 billion rupees of the PDFL will be converted into equity.
The remaining amount of R38 billion will be raised from commercial banks in exchange for sovereign guarantees granted by the Ministry of Finance.
SNGPL has already cashed the stand-by letter of credit provided by the NPPMLC as a guarantee against gas supply. Due to the delay in the commissioning of the two projects, the gas could not be obtained, but the SNGPL cashed the guarantees as part of a "take or pay" transaction.
Management of the gas charge
The CEC decided, in principle, that there would be no gas offloading in the country during the period from December to February. It allowed for the injection of approximately 160 MMcf per day of regasified LNG into SNGPL systems for domestic and commercial consumer use. The difference between natural gas and expensive imported LNG should be borne by consumers in other sectors.
SNGPL estimates that one million British thermal units (mmbtu) of regasified LNG will cost 35.63 rupees more than the cost of natural gas.
Available natural gas accounts for only 60% of requirements. With demand for more than 6 billion cubic feet of gas per day (bcfd), available natural gas is only 2.22 billion cubic feet per day, the Petroleum Division said.
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