Rs55b bailout package for NJHP facing delays

Money needed to pay off project cost bills, retention money to contractors

ISLAMABAD: The approval process of Rs55 billion commercial financing to bail out the Neelum-Jhelum hydropower project from financial quagmire is facing delays as the Federal Board of Revenue (FBR) has not provided comments on the draft summary sent by the Ministry of Water Resources to it.

The other day, the Ministry of Water Resources sent a reminder to the FBR chairman about its letter dated April 15, 2019, stating that the Economic Coordination Committee (ECC) had sought the comments of the board for according approval to the Rs55 billion bailout for NJHP.

In its letter, the ministry has requested the FBR chairman to furnish its views/comments on the draft summary at the earliest.

According to the ministry’s draft summary sent to the ECC for approval, a copy of which is available with Express, “The NJHP is facing serious financial crisis.”

It has sought permission from the ECC to allow NJHP to “raise funds of Rs55 billion from local banks through Islamic instruments ie Sukuk under the government of Pakistan guarantee with the exemption of related tax”.

“Since funds shall be raised under Islamic mode through Sukuk with the government guarantee; therefore, it shall be declared as SLR eligible approved security under sections 13 and 29 of Banking Companies Ordinance 1962 so that financial cost burden on cash-starved NJHP is minimised,” stated the summary. “The NJHP needs approximately Rs55 billion urgently to pay off its project cost bills and retention money to the contractors.”

The summary states that all four units of the NJHP are operational and generating electricity depending on the availability of water in the Neelum River.

The summary states, “The financial woes of the NJHP have compounded due to rupee depreciation and non-reimbursement of $280 million by Exim Bank China due to conditions imposed outside the contract. The requirements of the foreign cost component could be met by pursuing the Exim Bank China loan at government level for disbursements whose expiry date is August 2019. Should efforts with China Exim Bank materialise, then NJHP will be financially better and additional financial assistance of Rs55 billion shall suffice the immediate liabilities of contractors.”