The Ministry of Finance releases Rs6bln to address Pepco’s circular debt

[LahoreEstate]

ISLAMABAD: The Ministry of Finance has released Rs6billion to the Pakistan Electric Power Company (Pepco) to put a dint in the mammoth energy sector’s circular debt which has reached Rs180billion by the end of last month.



Sources told Dawn that the Finance Ministry released Rs4billion to Pepco on Saturday, in addition to Rs2billion released a day before, which will be transferred to the Pakistan State Oil (PSO), the country’s major fuel supplier and also the leading sufferer of the circular debt.



They said the PSO immediately needed some cash in order to be able to open some letters of credits (LCs) as banks are currently reluctant to support PSO in opening LCs for purchasing fuel.



But, even after getting the Rs6billion, the outstanding dues of the PCO to the state-controlled power generation entities would still remain at a mind-boggling level of Rs87billion, sources said.



The size of the circular debt increased to Rs180billion by the end of February from Rs159 billion in January this year. The government has assured the International Monitory Fund (IMF) that it will retire the circular debt by June this year.



But, now it seems to be a very challenging task for the government.



Sources told Dawn that foreign banks are now getting ‘increasingly reluctant’ to provide guarantees to the government to float term finance certificates (TFCs) of Rs98billion in the market to collect money and help Pepco retire its circular debt.



These sources said local banks on the other hand were willing to help the government in floating TFCs, but that the target could not be achieved without the help of foreign banks.



The government had planned to issue TFCs by the end of February, 2009 to retire almost half of the circular debt immediately. However, now the delay in issuance of TFCs is pumping more air into the ballooning circular debt.



Official sources said the PSO was getting cash strapped and had to recover Rs87 billion from its various clients as well as in the form of receiving subsidy from the government. The PSO had to receive its outstanding due of Rs80billion from different government’s power generation entities and over Rs7billion as in the form of price differential claims (PDC) which the government has to pay.



PSO’s major clients are the public sector entities including the Water and Power Development Authority (Wapda) and Pakistan Electric Power Company (Pepco).

The PSO is to receive Rs8.354 billion from Pepco, Rs 44.3 billion from Hub Power Company Ltd (Hubco), Rs 21.210 billion from Kot Addu Power Company Ltd (Kapco), and Rs3.302 billion from the Pakistan International Airlines (PIA) according to the figures as on February 28.



The PSO is to pay Rs40.072 billion to Pak-Arab Refinery Ltd (Parco), Rs8.7 billion to the National Refinery Ltd (NRL), Rs 13.2 billion to Attock Refinery Ltd (ARL) and Rs900 million to Bosicor.

http://www.dawn.com/wps/wcm/connect/Dawn...r-debt--il