PTI govt to pass on benefit of oil price cut to consumers

ECC also approves mechanism to retire Rs200b circular debt

ISLAMABAD: The federal government on Saturday decided to pass on the benefit of reduction in oil prices to consumers from Monday while turning down a proposal to give advantage of the reduced prices to oil refineries.

Headed by Adviser to Prime Minister on Finance Dr Abdul Hafeez Shaikh, the Economic Coordination Committee (ECC) of the Cabinet also approved a mechanism to retire Rs200 billion circular debt without making any significant changes in the original proposal that the Power Division moved a day earlier but was not liked by the ECC.

The ECC discussed in detail and approved the criteria for disbursement of Rs200 billion in power sector received through Islamic Sukuk, according to Ministry of Finance handout.

According to the decision, the energy purchase price inclusive of GST will be paid to ensure maximum generation is available during June, July and August as per the generation plan for the next three months.

The finance ministry’s handout was silent on the issue of Petroleum Division proposal to put on hold, until June 15, the proposed downward revision in oil prices for the next fortnight.

The proposal was aimed at allowing the industry to recoup some of its losses by selling at existing rates.

The energy ministry had warned the ECC that a reduction in petroleum prices would create a major supply disruption, which may take weeks and months to normalise as stocks with most of the OMCs were abnormally low.

A government official told The Express Tribune that the ECC did not accept the proposal and decided that the benefit of reduction in prices should be passed on to the consumers.

The Oil and Gas Regulatory Authority (OGRA) proposed a reduction of Rs7.06 per litre in the price of petrol for June 2020 slashing the price from Rs81.58 to Rs74.52 per litre.

However, the regulator proposed a slight increase of Rs0.05 in the price of high-speed diesel (HSD) from Rs80.10 to Rs80.15 per litre.

The regulator has suggested a reduction of Rs11.88 in the price of kerosene oil from Rs47.44 to Rs35.56 per litre.

Circular debt

The ECC decided that capacity payments will be disbursed to meet the debt servicing and taxation requirements for the period from June to end August 2020 and payments to WAPDA, nuclear power plants and partial settlement of import of power from Iran and NTDC transmission charges will be disbursed separately for operational requirements for public sector plants and entities, as WAPDA and nuclear power plants comprise more than 30% of the total planned generation in the next three months.

This disbursement criteria will be followed for funds released under Rs200 billion only, according to the finance ministry.

The Power Division had proposed to give Rs130 billion in energy purchase price payments and Rs70 billion in idle capacity payments.

The total circular debt has crossed Rs2 trillion and Rs1.2 trillion of the amount remains unsettled.

The ECC directed Ministry of Energy to submit a proposal in next two weeks setting up the general principles and exact formula of payments based on the principles for the future payments, said the Finance Ministry.

The ECC chairman also directed the Ministry of Energy to minimise discretion in the principle so that the funds may reach the maximum possible number of receivers and reduce the built up of liabilities towards the government.

It was also directed that as soon as the payments are made, the information should also be made public through the official website of the Ministry of Information for the general public.

The Power Division had proposed on Friday that Rs43.6 billion should be paid to three RLNG-fired power plants, IPPs, Kot Addu Power Company (KAPCO) and Generation-III companies.

Apart from that, Rs39.5 billion had been proposed to be paid on account of energy charges and Rs4.1 billion in idle capacity payments.

It proposed to give Rs9 billion to Pakistan State Oil through HUBCO and KAPCO.

An amount of Rs16 billion was proposed to be given to residual furnace oil (RFO)-based IPPs, including Rs3.1 billion in idle capacity payments.

The Power Division proposed that Rs22.5 billion should be given to gas-fired IPPs, including Rs3 billion in idle capacity payments.

An amount of Rs11 billion was proposed for coal-fired power plants and Rs25 billion for nuclear power plants.

The Power Division proposed Rs2.5 billion for WAPDA, hydel and Neelum-Jhelum projects including Rs903 million on account of idle capacity payments.

Roughly Rs6 billion was proposed for small hydel power plants and Rs15.5 billion for small wind, solar and bagasse-based power plants.

For four gas distribution and exploration companies, Rs2 billion was proposed and Rs1 billion for Tavanir – the Iranian company providing electricity to Gwadar. NTDC was also proposed to get Rs2 billion.