Pakistan Government to issues Rs70 billion TFCs
Thursday, May 10, 2012: The Government of Pakistan is mulling over the option of issuing Rs70 billion TFCs (term finance certificates) in order to curb inter-corporate debt and tackle the power crisis. The government has decided
to raise this amount from the reserves of Oil and Gas Development Company (OGDC).
The decision was taken in an emergency meeting to discuss the energy crisis and calm down things after the government defaulted on sovereign guarantees to independent power producers (IPPs).
President Asif Ali Zardari was present in the meeting and approved the proposal to generate Rs70 billion from the reserves of OGDC by floating TFCs, officials said.
The president directed the ministries of water and power and petroleum to send a summary to the Economic Coordination Committee (ECC) for approval of the proposed TFC plan.
Under the plan, the Central Power Purchasing Agency (CPPA) will purchase TFCs at Karachi Inter-bank Offered Rate (KIBOR) plus 5% for a period of three years to control the circular debt.
According to a petroleum ministry official, the TFCs will be transferred to OGDC’s reserves and the amount of Rs70 billion will be paid to Pakistan State Oil (PSO) and IPPs. PSO will then release the money to refineries to reduce
its dues. Later, the refineries will clear the dues of OGDC.
“This plan will settle the Rs450 billion outstanding dues of different enterprises,” the official said.
However, IPPs Advisory Council Chairman Abdullah Yousuf said the issue of sovereign guarantee default had not yet been resolved. “Negotiations are going on and the water and power ministry has assured us that it will take up the
matter with the ECC on Tuesday next week,” he said, adding the government was imposing penalties on IPPs, which was not fair.
Separately talking to the media, Water and Power Minister Naveed Qamar announced that power tariff would be increased by Rs1.20 per unit and a notification in this connection would be issued soon. The notification has been sent
to the Law Division for vetting.