ECC approves deal with K-Electric

Directs signing of new PPA should be expedited for smooth payment mechanism


Zafar Bhutta May 22, 2021
Sources said that the Nepra, Power Division and Finance Division also opposed the fairness and equity clause during a meeting. PHOTO: NNI

ISLAMABAD:

The Power Division has claimed to have saved consumers from a burden of around Rs170 billion due to removal of the ‘fairness and equity’ clause from an arbitration deal between K-Electric and state-run power utilities.

Sources told The Express Tribune that the issue of arbitration deal between K-Electric and state-run entities - National Transmission & Despatch Company (NTDC) and Sui Southern Gas Company (SSGC) – was taken up in a meeting of the Economic Coordination Committee (ECC) on Friday.

The ECC, chaired by Finance Minister Shaukat Tarin, decided not to include this clause in the agreement and approved the arbitration deal with K-Electric.

Earlier, K-Electric had dropped a clause of reciprocity regarding treatment of late payment surcharge (LPS) following opposition from the government.

Later, it demanded to include the clause of ‘fairness and equity’ in the arbitration agreement, which would have been binding on all entities which had no agreement on the late payment surcharge.

Officials said that it meant that all those entities could have to pay the late payment surcharge to K-Electric that they were not paying now.

Read: ECC mulls action against K-Electric

The Power Division had calculated that the burden on consumers on account of late payment surcharge would amount to around Rs170 billion in the future.

In addition, K-Electric had also demanded to make the Sindh government a party in the arbitration deal. However, the Power Division opposed it and K-Electric dropped the condition.

Sources said that the National Electric Power Regulatory Authority (Nepra), Power Division and Finance Division also opposed the fairness and equity clause during a meeting. Following this, the ECC decided not to include the clause in arbitration.

Officials said that the federal government was also going to sign a Power Purchase Agreement (PPA) with K-Electric which would result in enhancing electricity supply from 1,000 to 2,000 megawatts. The ECC also formed a committee under the chairmanship of Planning Minister Asad Umar, which would negotiate the terms of reference with K-Electric.

The ECC also accorded approval for settlement of issues out of past transactions through arbitration.

The federal minister for energy informed the committee that new PPA would be signed with the K-Electric soon.

The ministry of privatization made a detailed presentation before the ECC regarding grant of National Security Certificate (NSC) and outstanding payables and recoverable issues of K-Electric.

The minister for planning and energy updated the forum about the principles agreed between the federal government and K-Electric to resolve most of their long-standing issues regarding additional supply and payment procedures during the last meeting. The ECC appreciated the efforts made by all concerned and directed to expedite the signing of new PPA for smooth payment mechanism and uninterrupted power supply to Karachi.

Special Assistant to PM on Poverty Alleviation and Social Protection Dr Sania Nishtar presented a summary regarding allocation of funds for launching second phase of Ehsaas Emergency Cash (EEC) programme.

It was proposed that number of regular Ehsaas Kafalat beneficiaries would be increased and additional beneficiaries would be added (after identification through ongoing NSER) to mitigate economic hardships amid Covid-19 pandemic during the second phase of EEC.

After due deliberations, the ECC recommended the Ehsaas program to evaluate whether the new National Socio Economic Registry (NSER) survey targets those sectors which have been adversely affected due to smart and micro-lockdowns during Covid-19 and present updated proposal before the committee.

The underlying rationale is to provide targeted subsidies to support the most vulnerable segments of the society during the third wave of the pandemic.

Read more: ECC delays approval of IPPs’ arrears

The State Bank of Pakistan (SBP) presented a summary regarding “Refinance and Credit Guarantee Scheme for Collateral Free Lending to Small and Medium Enterprises (SMEs)” to facilitate SMEs which do not have collateral to get financing from banks.

The proposed scheme will enable SBP to partner with selected banks through a transparent procedure and provide collateral free financing to SMEs to promote sustainable economic growth and development in the country.

The ECC approved the summary and directed the SBP to develop a comprehensive monitoring mechanism with clear-cut benchmarks for effective performance evaluation of the scheme.

The power secretary placed a summary before the committee for allocation of 3.0 mmcfd gas from well NF Hor-1 (RE) to Pakistan Petroleum Limited (PPL), for a period of two years, for sale to any third party selected through a competitive bidding process at a mutually agreed and negotiated price under a Gas Sale and Purchase Agreement (GSPA).

The ECC considered and approved the summary with a direction that such summaries may be dealt at the level of the concerned ministry/division after fulfilling all codal formalities.

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