ISLAMABAD, Dec 26: In a series of book adjustments, the government has waived around Rs25 billion worth of interest and financial charges against almost all the public sector energy firms but primarily Wapda and KESC.

A separate schedule for the repayment of remaining Rs43 billion of principal debt has also been set with time-bound matrix, senior government officials told Dawn.

This has been done to restructure energy sector inter- corporate circular debt that officially stood at Rs54 billion but its cumulative spill-over to public sector oil and gas and private sector companies touched a staggering over Rs90 billion mark.

Total size of energy sector inter-corporate circular debt (ICD) as of June 30, 2001 amounted to Rs53.6 billion. Major chunk of this debt amounting to Rs42.5 billion comprised payables by Wapda and KESC. Further break-up suggests that oil and gas companies’ arrears against Wapda and KESC stood at Rs30 billion and Rs12.6 billion respectively.

“The situation arising out of the ICD had become so serious that it was decided to evolve a mechanism for its adjustment by off-setting payables and receivables from one organization to another by making adjustments in their books,” said an official at the finance ministry.

Accordingly, financial charges payable by Wapda worth Rs15 billion and KESC worth Rs6 billion to oil and gas companies as on June 30, 2001 have been written off. Subsequently, similar financial charges the oil and gas companies owe against each other would also be waived to the extent they have waived off to Wapda and the KESC.

The balance amount of financial charges payable by oil and gas companies to each other was being worked out by them ab initio at 10 per cent interest rate but payment schedule for this amount would be decided by these companies after mutual consultation.

For the repayment of Rs21.4 billion principal amount payable by Wapda and the KESC to oil and gas companies, a separate matrix has been approved.

Rs3.3 billion payable by Wapda to oil and gas companies under letters of exchange (LOE) arrangements of February 10, 1999 would be redeemed over a period of five years at 7.5 per cent interest rate with a grace period of one year.

Another Rs3.3 billion payable by Wapda to Pakistan State Oil will be paid under a separate arrangement that envisaged monthly payment for current supplies plus 30 per cent arrears.

Rs8.155 billion overdue principal payables (other than LOE and PSO) by Wapda to oil and gas companies would be passed on to Wapda as loan redeemable in five years at an interest rate of 7.5 per cent with a one year grace period.

All principal payables of KESC to oil and gas companies including those under LOE arrangements of February 1999 as of June 30, 2001 amounting to Rs6.67 billion would be redeemed over a period of 10 years including a grace period of two years free of interest.

All these repayments by Wapda and KESC to oil and gas companies would be made on quarterly basis. However, the liabilities of the KESC would be taken over by the government in case of its privatization but it would not provide any guarantee for all these measures.

As a spill-over impact of this restructuring, gas development surcharge payable by gas companies to the federal government and then onward to the provinces has also been readjusted.

Pakistan Petroleum Limited (PPL), Mari Gas and Sui Southern Gas Company (SSGCL) owe Rs9.125 billion including principal and interest amount of Rs4.5 billion and Rs4.6 billion respectively to the federal government.

Since the GDS is a transferable item to the provinces it could not be waived. However, the principal amount of GDS otherwise payable to the provinces have been adjusted against Wapda’s overdue payments of electricity and credited to the gas companies to whom Wapda owed large sums.

The gas companies would further adjust this amount against sums payable to the federal government. Financial charges worth Rs4.5 billion on GDS payable by gas companies to federal government have been waived off.