Rs25b payment in the offing to power and fuel suppliers within a week

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The government has decided to make an upfront payment of Rs25b to power producers and fuel suppliers within a week’s time for improving their cash flow position. This move comes amidst the approaching of the holy month of Ramazan, in which the government intends to keep power cuts to a minimum.

This payment of Rs 25b would be facilitated by payments from federal accounts, issuance of bonds and term-finance certificates (TFC’s) from various commercial banks. As per sources, to improve the liquidity position of Pakistan State Oil (PSO), a summary had been finalized from the Prime Minister’s office to make a payment of around Rs 25b.

Separate meetings were held on Thursday by Water and Power Secretary Yousaf Naseem Khokhar and Special Finance Secretary Shahid Mahmood to chalk out a payment plan and also discussed the idea of issuing local and international bonds in regards to this. The precise amount of TFC’s and bonds to be issued are in the process of being completed.

The circular debt of power sector had soared to Rs375b by the end of December last year. The receivables figure of the power sector had reached Rs330b by the end of April this year. The prime minister has also furnished warnings to the relevant ministries of power, finance and petroleum for ensuring that the power shortfall doesn’t cross over the 3000-3,500MW mark.

The receivables of PSO have soared to around Rs 300b and it has been seeking payments to the tune of Rs100-145b from the government in light of its default on current payables. It also requires Rs55 to 60b to ensure it is able to make fuel supply arrangements for this summer season.