Power Division stresses caution on hefty power taxes

Next month is likely to see the payment of Rs300bn in CPEC IPP dues. However, the Finance Division must receive the monthly payment for the CPEC-IPPs in the specified format.

Power Division stresses caution on hefty power taxes

The Power Division has been asked by the Finance Division to adjust Rs 20.726 billion as an advance payment to CPEC IPPs against the remaining five months of the current fiscal year (2023–24), according to official sources.

According to the Finance Division, Rs 2.726 billion in funds were turned over to the Power Division in June 2023, citing a letter from the Power Division dated June 22, 2023, regarding the implementation of the Revised Circular Debt Management (CDMP).

In regards to approval for the use of the remaining Rs 20.726 billion in advance payments from the Pakistan Energy Revolving Account (PERA), the Finance Division has once more advised that the Power Division may adjust the advance payments to CPEC-IPPs against the following five months of FY 2023–24.

The next month is likely to see the payment of Rs300bn in CPEC IPP dues. However, the Finance Division must receive the monthly payment for the CPEC-IPPs in the specified format.

The revised circular debt management plan for the power sector was approved by the Federal Cabinet in a meeting on February 14, 2023. It included a budget of Rs905 billion to manage the crucial cash flow requirements and to reduce the CD flow to the lowest level possible.

On June 21, 2023, Power Division informed the ECC of this. Included in this was the Rs 180 billion set aside in the budget for IPP stock payments.

The opening of a Pakistan Energy Revolving Account (PERA) at the State Bank of Pakistan with a Rs. 50 billion budget to be used during CFY-23 was approved by the ECC on a summary from October 31, 2022. CPPA-G was given permission to withdraw up to Rs 4 billion per month, receive Rs 32 billion until Jun 23, and leave Rs 18 billion in the assignment account unutilized.

Similar to this, after Uch Power’s stock settlement, Rs2.726 billion was made available under IPP’s stock clearance head.

Out of the Rs. 50 billion deposited in the PERA Account, the Power Division noted that Rs. 32 billion had been distributed, indicating that there is still a balance of Rs. 18 billion.

Government Power Plants (GPP) received approval for funding in the amount of Rs93.438 billion, which has already been paid out. However, there is a balance of Rs2.729 billion due to IPPs because only Rs33.836 billion of the allocated Rs36.562 billion was actually spent.

The Power Division submitted following proposals for consideration of the ECC: (i) a technical supplementary grant of Rs2.726 billion for Assignment Account from existing budgetary allocation against Finance Division Demand No 45 under the title lump sum provision for power subsidy in favour of Power Division demand No 33; (ii) release and authorize Power Division to utilize Rs.20.726 billion (Rs 18 billion already available in assignment account plus Rs2.726 billion to be transferred through TSG) in favour of GPPs; and (iii) authorize Power Division to utilize full amount out of assignment account in relaxation of limit of using Rs4 billion per month during June 2023.

Finance Division brought up that Rs18 billion had already been approved by ECC as Supplementary Grant in February 2023, so its goal could not be changed during the discussion that followed.

Additionally, the Finance Division suggested that Rs20.726 billion in Pakistan Energy Revolving Account funds, which can be drawn as an advance against future monthly installments, may be used for CPEC IPPs.

ECC may waive the requirement of a Rs. 4 billion monthly drawl limit if necessary to use the entire amount prior to June 30th, 2023. The Secretary of Power Division agreed to the suggestion from the Finance Division to use it for CPEC projects.

Following a thorough discussion, the ECC approved the proposal with the instruction that the funds could be used for CPEC projects through an assignment account called the Pakistan Energy Revolving Account.