Finance Ministry Identifies Problems in Power Minister’s Rs. 1.25 Trillion Circular Debt Settlement Plan

The Ministry of Finance has identified problems in caretaker Power Minister Muhammad Ali’s circular debt reduction plan and will not allow supplementary grants for any unbudgeted spending above the parliamentary approved level in FY24. The Finance Ministry said in its initial comments on the issuing of a Technical Supplementary Grant (TSG) of Rs. 157 billion that an allocation of Rs. 82 billion for the principal settlement of TFCs issued to OGDCL is available in the current FY, reported Business Recorder. Against the Rs. 46 billion demand for CPPA-G, only Rs. 25 billion is available because Rs. 21 billion was already given to GENCO II and GENCO III with the transfer of Rs. 131 billion as the first tranche of GPP settlement in CFY. According to the Finance Ministry, Rs. 35 billion of the intended compensation plan has already been released leaving only Rs. 122 billion available for use. On disbursing a TSG of Rs. 386 billion and Rs. 259 billion for SNGPL and SSGCL, respectively, the Finance Ministry said the Auditor General of Pakistan has only verified Rs. 414 billion in negative GDS claims for Sui Companies. Therefore, the jurisdiction for additional amounts must be explicitly established. Meanwhile, the Petroleum Division may establish whether a clear decision of the Federal Government (ECC/Cabinet) exists in which any price differential will be provided as a subsidy. The Finance Ministry added that the debt management plan does not justify the availability of additional funds for settling the payables of NPPMCL units. It is understood that NPPMCL is already regarded on par with IPPs for invoice clearance by CPPA-G, with 80-85 percent invoice payment, whilst other GPPs are paid 75-80 percent of the invoice. Authorities have resolved to pay the overdue amounts for IPPs and GPPs under the 2020 Settlement Plan. As part of that strategy, Rs. 47 billion has already been transferred to NPPMCL. Also, the Finance Ministry has no objections to the use of Rs. 77 billion from CPPA-G’s anticipated FC surcharge revenue for payment to OGDCL. According to the Finance Ministry, while the plan includes Benazir Employees Stock Option Scheme payments to the government from OGDCL, it makes no mention of PPL payables which must also be included. Notably, the circular debt reduction plan is largely limited to public sector firms, budget neutral, and leakage-free, with a total settlement of roughly Rs. 1.25 trillion. Of the total amount, Rs. 1 trillion is earmarked for the petroleum sector, while the power sector is set to get Rs. 250 billion. Sources said that these funds will be disbursed per the specific needs of each sector.