circular debt

IPPs unconvinced by govt plan for circular debt settlement

IPPs circular debt

Independent power producers (IPPs) have turned down the payment plan offered by the government for partial settlement of their dues by doling out Rs 450 billion to clear their outstanding bills in a bid to get rid of the mounting circular debt of the power sector.

IPPs have cited the early days of the last PML-N government, when a similar amount was settled with the IPPs with the same aim of putting an end to the menace.

Finance Minister Dr Abdul Hafeez made the offer to release Rs 450 billion to clear outstanding bills to IPPs in a meeting held on Thursday.

Independent power producers told the implementation committee led by Finance Minister Dr Abdul Hafeez Shaikh that it appeared that the government wanted ‘renegotiations’ on the already agreed terms and conditions of the MoUs signed in August, 2020, involving about Rs 836 billion worth of discounts against their original power purchase agreements (PPAs).

The power sector is currently facing around Rs 2.4 billion circular debt. Total overdue of private sector IPPs stand at around Rs 700 billion. Of these IPPs, 47 who had earlier signed Memorandum of Understandings (MoUs) with the government had outstanding dues worth Rs 400 billion till November 30, 2020.

Sources further said that the Federal Minister for Finance and Revenue, Dr Abdul Hafeez Shaikh, in a meeting with the representatives of IPPs, has presented a plan to resolve the circular debt issue in the power sector by offering a three part installment plan within a span of one year.

Sources said that the government has offered to pay one-third of the outstanding amount in January, one-third in June, and one-third in December.

The representatives of the IPPs and Minister for Finance Dr Shaikh will hold another meeting next month for finalization of the amendments to the Power Purchase Agreements (PPAs) in line with the MoUs the two sides signed in August 2020.

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