Govt injects Rs200b subsidy to tackle power sector circular debt woes

The allocated funds will be utilized to pay gas companies, addressing circular debt to the tune of Rs80 billion

The Ministry of Finance disbursed a subsidy of Rs200 billion to the financially strained power sector, aiming to address the growing issue of circular debt, which had escalated to Rs2.7 trillion based on the latest estimates.

Following the clearance of this amount, the remaining circular debt in the power sector is anticipated to be approximately Rs2.5 trillion by the end of December 2023.

Official sources confirmed that this subsidy clearance, totaling Rs200 billion, will assist both the power and gas sectors in settling their respective circular debts. The allocated funds will be utilized to pay gas companies, addressing circular debt to the tune of Rs80 billion.

A top official stated that the Ministry of Finance approved the disbursement on Wednesday evening, and the funds were provided to the concerned ministry on Thursday.

The Economic Coordination Committee (ECC) of the Cabinet, in its meeting on December 19, 2023, considered a summary regarding the settlement of payables to Government-Owned Power Plants (GPP) at par with Independent Power Producers (IPPs). The ECC granted the release of Rs262.075 billion to public sector power plants through a Technical Supplementary Grant (TSG).

The Ministry of Power had requested the approval of a Technical Supplementary Grant of Rs262.075 billion for the second quarter payment of Rs131.035 billion to Government-Owned Power Plants GPPs. This included allocations to various entities, such as Genco-11, Genco-111, Wapda, Quaid-e-Azam Thermal Power (RLNG), and Quaid-e-Azam Solar Power.

The ECC approved the request, directing the utilization of funds to prioritize clearing foreign-relent loans and cash development loans.

For the fiscal year 2023-24, a budgetary allocation of Rs127 billion has been designated for K-Electric tariff differential subsidy arrears.

To ensure the liquidity of the power sector, an immediate release of Rs57 billion to CPPA-G as an advance subsidy has been initiated, with adjustments to be made accordingly.

 

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