ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet has agreed to hold talks in both public and private sectors on extending the repayment period of power plant loans and pay about Rs 10 crore for interest payments in the energy sector from the Corona Relief Package.
The ECC meeting, chaired by Dr. Abdul Hafeez Sheikh, Advisor to the Prime Minister on Finance, also decided against the rescheduling of foreign trade loans as they had signed MoUs with G-20 members on about 2.04 billion in aid is allowed to sign.
The ECC also approved conditions for negotiations with independent power producers (IPPs) and generation companies to reduce capacity charges.
According to sources, the officers formed the ECC about the loans taken by the power generators which could be extended from the current 10-year period to 20 years and the issuance of bonds under the artificial refinancing structure.
The proposal was initially submitted to the Finance Ministry by a business community group led by Mian Mansha. he scheme will have a generating capacity of about 10,000 MW which includes projects with 3 to 4 years of loan service remaining.
The scheme will be applicable to power projects with a capacity of 10,000 MW.
Sources said that at present all the power plants are front load, the entire loan can be repaid in the first 10 years if the life of the project is 25-30 years.
In case of loan extension, there will be no change in the actual term of the loan but banks will buy the loan at a premium through bonds for a period of more than 10-13 years.
The current lender will get what it agreed to, but this will increase the buyer’s liability.
Similarly, for consumers in the long run, the price will be higher, but in the early years they will get about 65 paise less per unit.
ECC launches Pakistan Energy Squad 2 was also allowed to allocate Rs. 10 billion from the package under the gap closure arrangement for payment of interest for a period of six months.
It also proposed amendments to the National Electric and Power Regulatory Authority Act, which was headed by Dr. Ishrat Hussain, Advisor on Institutional Reforms and Simplicity.
Under the move, Pakistan needs to sign an agreement with all government bilateral lenders, including Paris Club lenders, to implement the G-20 debt relief initiative.
The committee included the Minister for Planning, the Prime Minister’s Adviser on Finance, the Trade Adviser, the Poverty Alleviation Adviser, the Prime Minister’s Focal Person on Corona and the Finance Secretary.