Govt approves Rs50b to mitigate electricity load shedding
IPPs payable swell to the Rs 1.6 trillion mark
Ibn-e-Ameer
The government has approved Rs 50 billion to mitigate the worst power outages in the country, adding miseries in life of the masses.
In a recent meeting, the economic coordination committee (ECC) approved Rs 50 billion grant to mitigate the worst electricity load-shedding across Pakistan.
During the meeting, the power division informed that the power sector was facing a liquidity crisis due to the rise in energy prices in the international market. Independent Power Producers (IPPs) had exhausted to procure fuel and IPPs were pressing hard for clearance of the outstanding receivables.
The Ministry stated that the payables position as of 30″ April 2022 for IPPs was Rs 1612 billion. It informed the prices of fuels increased in recent months as compared to the notified reference rates.
The price of Brent crude had exceeded USD 110/Barrel as compared to USD 54/Barrel last year, Similarly, the price of imported coal had also surpassed USD 300 per metric ton (Landed cost over USD 500/M. Ton) as compared to USD 80/M.
In addition, fuel cost adjustment takes approximately two months to collect from consumers. The power division said that this has created cash flow constraints for CPPA-G to fulfil the operational needs of IPPs for maintaining a smooth fuel supply chain during this summer.
If the power producers were not paid on due dates, it was likely to increasingly constrain the availability of electricity and cause shutdowns of electricity.
The Ministry informed that the Federal Cabinet in its meeting held on 10th May 2022, was also apprised with regards to an immediate cash injection of Rs 100 billion to avoid load management during this summer.
Given the fuel supply chain requirements, particularly the payment requirement for coal in transit, it was imperative that immediate cash may be released to the sector from fiscal space. Currently, more than Rs 70 billion in coal is at the port in transit and to get it cleared, Rs 20 billion would be arranged by collection from consumers.
However, a supplementary grant of Rs 50 billion in the head of equity of power distribution companies was required to meet the minimum possible demand for coal supply.
The Ministry requested for grant of Rs.50 billion as Supplementary Grant during CFY 2022 in the Head ‘Investment A014’ under Power Division Demand No.034 (18 8011 Payment to IPPs) as an investment in DISCOs to meet the requirement of the power sector and in order to avoid the system failure in the country.
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The Economic Coordination Committee (ECC) of the Cabinet considered the summary submitted by the Power Division regarding the “Additional Supplementary Grant of Rs.50 billion” and approved with the direction that requisite funding would be provided by the Finance Division against future subsidy claims as Supplementary Grant.
