The Power Division has proposed to pay off the existing outstanding payments of the Independent Power producers (IPPs), the government should consider launching the Pakistan Energy Sukuk-2 through Power holding Pvt limited. The revenue generation by the issuance of Sukuk-2 is estimated to be around Rs 200 billion. The proposal will be presented to the Economic Coordination Committee (ECC) on Wednesday and will likely be approved.
Officials said that the government has established a committee under the Advisor to PM on Institutional Reforms and Austerity Dr. Ishrat Hussain to review the proposal and recommend any changes required.
According to some officials, the Ministry of Finance has called a meeting of Islamic Banks for the issuance of Sukuks, on July 29.
The government had been looking for a cheap source of financing to pay the overdue payments of the IPPs as they had started seeking international arbitration for their overdue unpaid bills. The government lost the case against the IPPs in the London Court of International Arbitration, creating a further liability of Rs 35 billion on the taxpayers.
Power Division Secretary Mr. Irfan Ali had last month told the Senate Standing Committee on Power that the government was negotiating with the IPPs to wave off some of the Interest payments. The government had finalized the negotiations and the IPPs might decrease their mark-up on outstanding payments from 4.5% to 2% and also agreed to apply mark-up after 90 days of non-payments instead of the current policy of applying mark-up after 35 days of non-payments. As a result, the government might get relief of around Rs 11 billion.
An official said that the government is overestimating the relief. He added that the government might get a benefit of a couple of billions but the estimated amount of Rs 11 billion in relaxation is not accurate.
The National Electric power Regulatory Authority, National Accountability Bureau and the Inquiry Commission on Debt are investigating the cost at which the IPPs sell their power, the government suspects the IPPs of charging more than the actual cost and is planning to establish a commission, consisting of specialists, to investigate the issue.