Finance Ministry Refuses Rs50 Billion CPEC Grant: CPEC IPPs

Pakistan’s Ministry of Finance has declined to provide an additional Rs50 billion in funding for the CPEC’s electricity projects.

The Finance Ministry had received a summary of this information from the Power Division. The new ECC, which will be formed when the new Cabinet takes the oath of office, has yet to evaluate the summary.

After receiving information that GoP officials at higher levels intend to work with CPEC IPPs to explore options for voluntary tariff reductions and excess profitability in line with settlements reached with other IPPS, the Finance Division wrote the Power Division on April 15, 2022, to let them know. Nevertheless, in order to resolve these power projects’ cash concerns, the Finance Division has already granted Rs.50 billion to the Power Division with clearance from ECC/Cabinet.

In a meeting with the International Monetary Fund (IMF), the Finance Division stated that the topic of distinct treatment in this case compared to other IPPs had been highlighted.

According to these same sources, the Finance Division has asked the Power Division to offer an updated stance at the ECC meeting.

Additional Rs.50 billion in supplementary funding is not supported by the Finance Division, which cites the significant shortfall in the recovery of Petroleum Levy and Sales Tax on petroleum products, as well as the subsidy on price differential claims and reduced rates of consumer-end electricity tariffs.

There is a second requirement for a new summary of Rs 50 billion in supplemental grants for CPEC projects from the Cabinet Division, which has been requested by the Power Division.

Because of its financial plight, Power Division has turned to Prime Minister for aid in recovering Rs 111 billion from states outside of Azad Jammu & Kashmir.

As a result, the Power Division has started a nationwide recovery drive to help Discos improve their financial health and pay off their power purchase costs on time so that they do not accrue additional fees that add to their overall circular debt burden. We have contacted all relevant Secretaries, Federal Ministries/Divisions, and Provincial Government Chief Secretaries in order to pay out the unpaid dues resulting from the massive recovery received by Disco against their respective departments.

Regarding Disco’s cash flow and financial performance, the Power Division claims that the Discos’ receivables are causing both. Power sector performance, particularly in the form of ever-increasing cyclical debt, has taken a significant toll because of this trend.

To settle their overdue power bills and to ensure prompt payment in the future, Power Division has also requested that Prime Minister’s Office order Federal Ministries/Departments and Provincial Governments to follow the appropriate guidelines.