ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet on Tuesday approved a sovereign guarantee for Pakistan International Airlines (PIA) to acquire a Rs1 billion loan for Hajj operations and allowed an increased tariff for import of 74MW electricity from Iran.

The meeting, presided over by Finance Minister Ishaq Dar, was also informed by water and power minister Khawaja Asif that the import of electricity from Iran was not hit by the UN sanctions because the existing agreement had come into force much before these restrictions. Payments were also taking place through barter trade.

He went on to suggest that his ministry, in fact, “intends to import 1,000MW of electricity from Iran in the coming years”.

The proposed 1,000MW import option had been in the pipeline for years but the two sides have not been able to sort out issues on tariff and reach consensus on technical and legal parameters of the agreement.

Power ministry intends to import 1,000MW from Iran

The finance minister while approving the request for revised and increased tariff for the 74MW with effect from Jan 1, 2015, noted that the proposed plan for additional 1,000MW import from Iran fit well with the government’s comprehensive energy plan currently under preparation to address power shortages.

Pakistan and Iran had entered into electricity trade in 2002 with 32MW for Makran, Balochistan at three cents per unit, going up to five cents in 2005 and to 6.25 cents in 2008. The energy import from Iran increased to 74MW in 2012 and its tariff was linked to a new formula based on monthly average price of crude which needs to be protected under a revised amendment. The new rate would touch 10 cents per unit.

The board of directors of the National Transmission and Dispatch Company (NTDC) has already cleared the amended tariff that would now be submitted to the National Electric Power Regulatory Authority (Nepra) for approval so that amended agreement could come into force on Jan 1, 2015.

The ECC also directed the ministry of commerce to work out how payments to Iran’s TANAVIR Energy would be made through supply of wheat and rice and take it up with Iranian authorities for their consent to ensure earliest payment of past arrears.

The ECC also approved a request of the Aviation Division to extend a government guarantee to PIA to acquire Rs1-billion loan from Faysal Bank to arrange Boeing 747 from Jordan and arrange fuel for maximum planes for Hajj operations starting in two days.

Secretary Aviation Division told the committee that financial discipline put in place last year was working well and showed results in first quarter but the company needed funds for working capital which had been arranged from Faysal Bank on Islamic financing for five years for paying liabilities. The ECC directed that the loan should only be utilised for engine and component support programme and for ensuring fuel supply.

The ECC also considered another power ministry’s proposal for a new transmission policy to attract private sector investment in transmission lines projects but deferred due to lack of input from the ministry of law and the federal board of revenue despite their crucially required opinions.

It was stated that due to large scale capacity additions in the electricity generation system there would be a need to put in place additional transmission networks. Under the draft policy, the private sector will be invited for investment in the new transmission lines to reduce burden on the public sector.

Chairman of the Federal Board of Revenue (FBR) informed the ECC that the draft policy was not circulated to the FBR and in order to examine its implications on revenue generation, necessary time be given for their comments.

Dar, therefore, directed that all stakeholders be consulted on this important issue before taking it up against at the next meeting.

Published in Dawn, August 27th, 2014