Pakistan waives Rs195m dues against Karkey

PTI govt may not hike gas tariffs for domestic consumers, ECC told

ISLAMABAD: The government has waived off all penalties and taxes against a Turkish rental power generation firm to pave way for the release of its four ships in Pakistan’s custody – a prerequisite for amicable settlement of the $1.2 billion penalty slapped on Islamabad by an international adjudication tribunal.

The decision was taken by the Economic Coordination Committee of the Cabinet (ECC) in a meeting on Wednesday. Settlement of Rs195 million dues against the Karkey rental power plant company is critical to the release of its four vessels which have been in Pakistan’s custody for almost nine years.

The ECC was also informed that the government might not hike gas prices for domestic consumers and instead pass on the burden to the industries that run captive power plants on gas. The ECC approval for increasing gas prices by up to 15% to recover an additional Rs33 billion from consumers remains pending for the last 10 days.

Advisor to Prime Minister on Finance Dr Abdul Hafeez Shaikh, who is also chairperson of the ECC, urged the Petroleum Division to expedite and complete the consultation process ahead of upcoming talks with the International Monetary Fund (IMF).

The Oil and Gas Regulatory Authority (Ogra) has determined revenue requirements for the Sui Northern Gas Pipeline Ltd at Rs274.2 billion, while at current gas prices it can recover Rs243.4 billion, reflecting a shortfall of Rs30.8 billion that has to be bridged by increasing the tariffs, according to the Petroleum Division.

Special Assistant to PM on Petroleum Nadeem Baber told the ECC that the summary for increasing the gas prices has been circulated for seeking comments from relevant government departments. He is said to have told the ECC that the Petroleum Division has worked out a proposal where the gas tariffs would not be increased for domestic consumers. But the monthly gas meter rent will be increased fourfold for them to Rs80 per month from Rs20.

Gas tariffs for all other categories will again go up, once the Petroleum Division furnishes a fresh summary before the ECC.

The ECC approved waiver of all port dues amounting to Rs194.95 million till end of Jan or till the vessels leave the port accruing against Karkey, according to an official handout of the Ministry of Finance issued after the ECC meeting.

The waiver was required as a consequence of a settlement agreement reached between the government of Pakistan and Karkey, it said.

In last November, Prime Minister Imran Khan announced that his government with the help of Turkish President Recep Tayyip Erdogan had amicably resolved the Karkey dispute and saved Pakistan $1.2 billion penalty imposed by the International Centre for Settlement of Investment Disputes (ICSID) in Aug 2017.

Karkey was one of the 12 rental power companies awarded contracts for electricity production by the PPP-led government in 2009. The Turkish firm had installed a 232MW ship-based rental power plant and signed a rental services agreement in April 2009 under the Rental Power Policy 2008 to produce electricity in collaboration with Lakhra power generation company.

In 2012, the Supreme Court took suo motu action against the rental power projects, declaring illegal all such agreements signed under the Rental Power Policy 2008. The Turkish firm had taken Pakistan to the international court to seek reparation.

The ECC also approved settlement of outstanding liabilities of the Pakistan Steel Mills against SSGC for non- payment of gas bills. The ECC approved release of Rs350 million for partial settlement of the SSGC liabilities.

The ECC approved establishment of a $10 million Trust Fund to implement risk sharing facility under $140 million World Bank loan for Pakistan Mortgage Refinance Company Limited (PMRCL). The purpose of the trust will be to leverage the Trust Funds by issuing guarantees in favour of the mortgagors to cover possible losses from eligible mortgage loans.

The Finance Division also sought approval for the demand of Rs80 million as technical supplementary grant in the budget of the Finance Division for the financial year 2019-20 for providing assistance for families of the government employees who expired during service and provision of an ad-hoc relief allowance 2019.

The ECC also approved a proposal sent by the finance ministry for issuance of government direction to the State Bank of Pakistan under sub- section 6(A) of Section 17 of the SBP Act 1956 to sell its shares in the House Building Finance Company Limited (HBFCL). The company is among the entities that the PTI government has short-listed for privatisation.

The ECC also approved a supplementary grant amounting to Rs.00 million for the National Information Technology Board (NITB).