Tarin defers decision on IPP payments, LNG subsidy

Published April 29, 2021
ISLAMABAD: Federal Minister for Finance and Revenue Shaukat Tarin chairing a meeting of the Economic Coordination Committee of the cabinet on Wednesday.—PPI
ISLAMABAD: Federal Minister for Finance and Revenue Shaukat Tarin chairing a meeting of the Economic Coordination Committee of the cabinet on Wednesday.—PPI

ISLAMABAD: In his maiden meeting of the Economic Coordination Committee (ECC) of the cabinet, Finance Minister Shaukat Tarin deferred taking a decision on two crucial agenda items — payments to independent power producers (IPPs) and how to go ahead with subsidy on LNG supplies to export industries.

Presiding over the ECC meeting, the newly inducted finance minister constituted two smaller groups on both subjects to have focused discussions.

A cabinet member said Mr Tarin appeared to have certain reservations over handling of the IPPs, but noted that the deals had already been finalised.

He said one or two members of the ECC, more interested in politics than in the economy, also wanted to express their views on issues relating to the IPPs. But Special Assistant to the Prime Minister Tabish Gauhar suggested that a smaller group should hold a separate meeting on the issue before the ECC formally took it up for a decision.

Forms two groups to discuss the issues

A participant also suggested that the disputed IPPs, commonly known as Mansha group, be handled separately for the time being because of involvement of the National Accountability Bureau and payments to all others be cleared under settlement agreements signed with them in February.

The finance minister agreed to have separate discussions with relevant members and constituted a sub-committee, headed by himself and comprising ministers and secretaries from power, petroleum and other related ministries and divisions, for further deliberations. It was decided that the sub-committee would present a firmed-up proposal through a revised summary before the next ECC meeting for consideration and approval.

The Power Division moved the summary for allocation of about Rs90 billion as first instalment of payments to the IPPs from Rs403bn committed to them under the agreements reached with the IPPs.

The summary sought payment of first instalment of the IPPs set up under the 1994 power policy and those established before them (about Rs90bn), withholding payments to those set up under the 2002 policy till clearance by NAB or payments subject to future adjustments and stopping process of arbitration submission agreements with 2002 policy power plants that were blamed for having drawn excess profits.

The Power Division submitted another summary regarding the release of subsidy for supply of 100 per cent RLNG to export-oriented industry for March 2020. The ECC approved the summary for payment of Rs4bn for the said month. However, SAPM Dr Waqar Masood Khan and the PM’s adviser on austerity Dr Ishrat Hussain suggested that the matter needed to be settled on a long-term and sustainable basis.

The government had decided in 2018 that gas supply to the industrial sector (exporters of five zero-rated sectors, namely textiles (including jute and carpets), leather, sports and surgical goods) in Punjab would be revised from 28:72 to 50:50 ratio for domestic gas and RLNG. The weighted average gas tariff of such consumers will be $6.5 per MMBTU. The gas price of similar consumers of the Sui Southern Gas Company and those of the Sui Northern Gas Pipelines Limited in Khyber Pakhtunkhwa will remain unchanged. The difference will be funded through budgeted subsidy.

The meeting therefore “decided to form a sub-committee consisting of Adviser to PM on Commerce, SAPM on Power and other relevant stakeholders to review the power and gas subsidies provided to export-oriented sectors”, with a directive to submit a holistic proposal before the ECC.

The ECC approved four technical supplementary grants of Rs302bn, including Rs22.7 million for the Law and Justice Division, for meeting shortfall of funds under various administrative and related heads, Rs10.025m for the Ministry of Human Rights to fund the National Trust for the Disabled, Rs7.2m for the Ministry of Housing and Works for execution of development schemes of the Interior Division and Rs262m for the same ministry for various expenses.

Federal Minister for Interior Sheikh Rashid Ahmad, Minister for Economic Affairs Division Omar Ayub Khan, Minister for Energy Hammad Azhar, Minister for Privatisation Mohammadmian Soomro, Minister for Railways Azam Swati, Dr Ishrat Hussain, Tabish Gauhar, SAPM on Revenue Dr Waqar Masood Khan, federal secretaries, chairmen of the Board Of Investment and the Securities and Exchange Commission of Pakistan and other senior officers attended the meeting. The Governor of State Bank, Dr Reza Baqir, joined through video link.

Published in Dawn, April 29th, 2021

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