ISLAMABAD, April 24: The federal government has agreed in principle to restructure over Rs20 billion of its loan payable by Wapda during the current fiscal year to rationalize it on a par with market rates and to relieve the utility of cash-flow problems.

The prime minister has directed the finance ministry to initiate a comprehensive exercise to determine the true cost of loans extended to Wapda whose repayment to the government of Pakistan has become a big problem for the utility.

Informed sources said the debt repayable by Wapda to the federal government during the current fiscal year stood at Rs20 billion or thereabouts, including interest. The debt restructuring could give a relief of Rs6 billion to Wapda if charged at the current market rates of 9 per cent, a Wapda official said.

Separately, Wapda on its own has taken an initiative with the banking sector, and has so far restructured loan of around Rs7 billion on a 3.5 per cent interest rate during the last three months.

It signed an agreement with the NBP on Thursday to roll over a Rs2.5 billion debt on less than 4 per cent interest, the Wapda sources said.

Wapda has to borrow short-term loans — now restructured at 3.5 to 4 per cent — to meet its immediate needs. “We would continue to refinance more loans from the banking sector which are now maturing,” said the Wapda official.

The government is currently charging Wapda around 18 per cent interest even on loans the government itself has obtained from foreign donor agencies on as low as 2 per cent rate. This interest rate is ultimately being paid by the general public because debt repayment forms a major component of Wapda’s consumer tariff.

The government extends two kinds of loans to Wapda. One which it borrows from the donor agencies in foreign exchange and relends to Wapda and the other through budgetary allocations. In both the cases, it charges Wapda 16-18 per cent interest.

Wapda had informed the prime minister that the government, which had secured a Paris Club rescheduling on lower interest rates, should pass on the benefit to the utility, and ultimately to the consumers.

Wapda believed that interest rate reduction on foreign debt had bec ome a source of revenue for the government which it must share with the real stakeholders.

The Wapda sources said that in some cases, the amount of interest had become higher than the principal amount because of their long-term maturity period and higher interest rates.

While public-sector arrears of Wapda bills have crossed a staggering Rs34 billion mark, the federal government is asking the power utility to take loans from the federal government on higher interest rates, Wapda officials said.