ISLAMABAD, June 26: The PML-N government has convened a meeting of its Economic Coordination Committee (ECC) of the cabinet on Thursday night to discuss measures to resolve the issue of Rs506 billion circular debt and approve revival of a much-delayed 425MW Nandipur Power Project.

The meeting, to be presided over by Finance Minister Ishaq Dar, will be held late in the night because of a possible approval of the budget for 2013-14 by the National Assembly during the day.

A senior official said summaries for clearing circular debt and a restructuring plan for the Nandipur project would be the main items on the agenda of the meeting.

Although a supplementary grant would be secured as part of the budget to pay off a major part of circular debt, the mechanism for disbursements to power companies required to be cleared by the ECC, he said.

Besides, approval by the council is mandatory for instruments to raise funds from the banking sector.

He said an amount of Rs306bn payable to independent power producers (IPPS) as of May 31 had been “reconciled and agreed upon” but it was expected that the council would approve payment of first instalment amounting to Rs250bn.

A major chunk of the amount would go to Hub Power Company, Kot Addu Thermal Power Company, Mian Mansha’s four power plants, Attock Power and Uch Power, he said. Replying to a question, the official admitted that questions had been raised about the proper audit of the IPP’s payables before payments was made to them from the budget, but said the government was moving in a positive direction to clear the backlog and induct about 1500-2000MW of idle power generation capacity into the system before the advent of Ramazan.

“Audit and examination of accounts is an ongoing process which should not hinder smooth functioning of the system. They (IPPs) are not running away. If any discrepancy is found in audit, it can be easily adjusted against upcoming payables. The priority at the moment is to reduce loadshedding”, he said.

The official said about Rs126bn would be raised from the banking sector through bonds on behalf of the Oil and Gas Development Company (OGDC), Pakistan Petroleum Limited (PPL) and Pakistan State Oil (PSO).

He said the government would provide Rs326bn for the settlement of the circular debt and Pepco dues before June 30.

Of the amount, Rs200bn would be provided out of the budget to make cash settlements mostly with IPPs and the PSO. Another Rs126bn would be settled through bonds to be issued on behalf of the OGDC and the PPL — both having no bank borrowing at present.

The two companies will get market-based interest on these bonds.

The remaining Rs177bn of the circular debt relates to public sector corporations like Wapda, the Government Holdings Private Limited, Mari Gas and Pakistan Atomic Energy Commission, having counter liabilities with the government and will, therefore, be settled in July this year through a mechanism of book adjustment.

About Rs100bn would be raised through a 28 per cent or 2.5 per unit increase in electricity tariff from July 1. The government will immediately “embark upon a new plan of cascaded elimination of untargeted subsidies which will significantly reduce financial burden of the government over the medium term and create fiscal space for affirmative interventions to benefit the deprived segments of society”, according to a government plan to be presented at the ECC meeting.

NANDIPUR PROJECT: The official said the Nandipur project had been delayed by more than five years because of flimsy disputes and machinery worth billions of rupees imported for it had been rusting at Karachi port and incurring demurrage.

The government will waive off demurrages and restructure the project financing so that it could be implemented soon.

He said Prime Minister Nawaz Sharif and Chief Minister of Punjab Shahbaz Sharif were taking personal interest in revival of the project to reduce electricity shortfall in the province.