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Govt approves Rs270b for circular debt

Govt approves Rs270b for circular debt

ISLAMABAD: The federal government approved Rs270 billion for settlement of circular debt and additional spending by various ministries and decided to discontinue Rs3 per unit electricity subsidy for local industries.

The ECC allowed settling the outstanding liabilities of the Prime Minister Industrial Package. Former premier Nawaz Sharif had approved Rs3 per unit subsidy for all industries including the exporters.

But the finance ministry was reluctant to book these liabilities in the budget that added Rs117 billion in circular debt. The government decided to settle Rs87.7 billion through non-cash adjustments against the foreign loans that it took and relent to power sector-related companies.

The Rs87 billion have been settled against Chashma nuclear power plants, Water and Power Development Authority (WAPDA) and National Transmission and Dispatch Company (Ntdc). The Industrial Support Package (ISP) claims of K-Electric will be paid from the budget.

The Power Division briefed the ECC about cash and non-cash settlement for power sector, according to an official handout of the finance ministry. It added, the ECC resolved the issue of ISP by adjusting it against the loans receivable from power sector entities.

It formed a committee, comprising senior representatives from power and Finance & Economic Affairs Divisions to address the issue of ISP, according to the finance ministry.

The committee directed that the ISP claim of K-Electric amounting to approximately Rs30 billion may be looked into and solid recommendations be made.

The ECC directed that the ISP subsidy of Rs3 per unit should be restricted to only exporters, according to the finance ministry officials. This would increase the cost of electricity for local industries.