Advisers have warned that without settling issues relating to gas sale and power purchase agreements and debt recapitalisation, the sale transactions of Balloki, Haveli Bahadur Shah and Bhikki power plants would be affected.—Reuters/file
Advisers have warned that without settling issues relating to gas sale and power purchase agreements and debt recapitalisation, the sale transactions of Balloki, Haveli Bahadur Shah and Bhikki power plants would be affected.—Reuters/file

ISLAMABAD: For facilitating the proposed privatisation of power plants on a government-to-government (G2G) basis, the Economic Coordination Committee (ECC) of the cabinet on Wednesday approved changes to the gas sale agreements (GSAs) of three LNG-based power projects in Punjab — Balloki, Haveli Bahadur Shah and Bhikki.

A meeting of the ECC, presided over by Finance Minister Ishaq Dar, also allowed Pakistan Railways to enter into a business deal with the private sector for laying fibre-optic cables on profit sharing. It approved urea price at Rs2340 per bag for farmers and its incidental charges of Rs594 and Rs1008 per bag for transportation from Karachi and Gwadar, respectively.

The government has been in talks with friendly governments in the Middle East for the sale of at least two LNG-based power plants — the most efficient so far — on a G2G basis to raise more than $2 billion direly needed to support the fast diminishing foreign exchange reserves.

The financial advisers on these transactions had warned that without settling issues relating to gas sale agreements (GSA), power purchase agreements (PPAs) and debt recapitalisation, the sale transactions would be affected.

ECC fixes urea price at Rs2,340, allows Railways to sign private deal for laying fibre-optic cables

The ECC was told that the previous government had in April 2021 waived the minimum 66 per cent take-or-pay commitment in GSAs and PPAs and also relieved them (practically Power Division) of the requirement of annual production plan for firm gas commitment by replacing it with monthly gas plan.

The decision practically came into practice, but related amendments to GSAs and PPAs could not be given legal effect. This delayed the privatisation of these power plants.

The Power Division now realised that given the unprecedented rise in the cost of LNG, the April 2021 decision should be revisited to optimise the utilisation of LNG for continued operations of these power plants, thus enabling their security of operations to the new buyer. Also, it proposed capping of gas sale deposit (GSD) payable by these plants to gas companies at Rs15bn per plant instead of significantly higher amount (Rs60bn) that was worked out under the existing arrangement at one-fourth price of maximum LNG allocation.

Therefore, at the request of the Power Division, the ECC approved changes to the April 2021 decision and concluded that instead of completely doing away with the 66pc minimum take-or-pay commitment, it should be fixed at 33pc to “guard the interests of the both buyers and suppliers”.

Secondly, it also approved fixing of the GSD under the GSA at Rs15bn per power plant instead of (Rs60bn) existing GSD equivalent to one-fourth of maximum gas allocation valued at current applicable gas price inclusive of taxes.

Imported urea

The ECC also approved a summary of the Ministry of Industries and Production about revision of price of imported urea and allowed fixing of dealer transfer price (DTP) of imported urea at Rs2340/50kg bag by National Fertiliser Marketing Limited (NFML). It provisionally approved incidental charges from KPT at Rs594/bag and from Gwadar at Rs1,008/bag to bring stability in the prices of urea in the market. The ECC directed the provinces to share 50pc of the subsidy on imported urea.

The meeting approved a summary of the Ministry of Railways about on its business plan to generate decent source of earning in order to improve its financial health through laying of fibre-optic cables along its infrastructure spread over 7,791 kilometres across the country. Pakistan Railways advocated that owing to its strategic track infrastructure, it could earn sufficient funds by allowing laying of fibre-optic cables for digital connectivity and hence be allowed to move to a business model on “gross earning/sharing” of revenue with the private sector. The existing public and private right-of-way policy restricts such businesses.

The ECC, after discussions, constituted an inter-ministerial committee comprising federal secretaries of the relevant divisions, headed by the minister for law and justice, to prepare a draft right-of-way policy on the issue.

The ECC considered another summary of the Ministry of Industries and Production about provision of funds to Heavy Electrical Complex (HEC) to release mark-up amount to Bank of Khyber (BoK).

Published in Dawn, January 12th, 2023

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