Commercial banks are refusing to finance power projects on account of the energy sector’s circular debt that has soared to Rs. 2.33 trillion as of 31 August 2021, as reported by Business Recorder.
The Power Division had informed the Executive Committee of the National Economic Council on 10 September that the Central Development Working Party would submit a number of proposals to the Executive Committee of the National Economic Council (ECNEC).
These proposals focused on a change in the mode of financing of Rs. 21.500 billion as a Cash Development Loan that would allow for Rs. 2.355 billion as a Cash Development Loan (CDL) through a Technical Supplementary Grant.
Additionally, the Power Division would shift the allocation framework of the Public Sector Development Program to make adjustments for Rs. 19.145 billion for the Jamshoro coal project to reflect as a CDL during the upcoming fiscal years.
The Jamshoro Power Company Limited GENCO-I/Power Division plans to hire independent consultants to advise the Power Division on the restructuring and management of the project.
The Power Division will hold an internal inquiry into the poor financial management of the project and will submit a report to the Central Development Working Party (CDWP) within three months. The CDWP approved the conditions.
The report added the Power Division has been unable to pay the Chinese companies that are building power plants in Pakistan.
The Central Power Purchasing Agency Guaranteed’s circular debt issue is preventing it from paying Chinese investors.
The electricity distribution companies have also been affected by the circular debt in FY 2021.
The ECNEC discussed the Ministry of Planning, Development and Special Initiatives’ proposal for a CDL to the Jamshoro Power Company Limited to run a coal power project. The Power Division will consult with the Finance Division to arrange for the financing of the project from the National Bank of Pakistan or other banks.