The government and K-Electric have agreed to sign a new Power Purchase Agreement (PPA) to supply a total of 2,050 MW to Karachi.
According to the reports, under this agreement, the government will pay the tariff subsidy on time and clear its electricity bills through the K-Electric standby letter of credit (SBLC).
In this regard, the government has pledged to sign a separate agreement with the Ministry of Finance for the payment of market-based mark-up for the delay in payment of subsidy.
In collaboration with K-Electric Screw Account will provide SBLC to ensure that Central Power Purchasing Agency (CPPA) Electric receives payment for monthly bills due to power supply under the automated system.
Old payments and receipts will be settled through mediation.
K-Electric’s key demand for linking subsidy payments with electricity bills to the CPPA is at a May 5 meeting of the Economic Coordination Committee (ECC) subcommittee, an official said.
He said that while both the parties had agreed to sign the agreements on payment modalities and uninterrupted power supply to Karachi, SBL would not be able to pay the basic amount of subsidy from the Ministry of Finance.
It was agreed that liquidity would be a major challenge for SBLC or payment of subsidies so a solution was needed or KE would have to borrow from banks.
KE also wanted a government guarantee for the timely payment of subsidies.
At current rates, the monthly electricity bill payable by KE is about Rs. 13 billion, while the monthly tariff subsidy is about Rs. 8-9 billion.
More meetings will be needed to work on any agreement.
Federal Minister for Planning and Development Asad Umar convened a meeting of the sub-committee at Governor House Karachi. Team participated.
Asad Umar confirmed to Dawn that the dispute over past payments and receipts has been disconnected, a move that was necessary without which it would not be possible to supply about 2,050 MW of electricity from the national grid to Karachi.
“KE was privatized, not Karachi or the people of that city,” he said.
The Federal Minister said that the supply of 650 MW to KE has been going on for years without any legal agreement and now it will be increased by about 1400 MW.
Energy Minister Hamad Azhar said in a tweet, “I am glad to report that the Federal Govt & KE have today agreed-upon principles to resolve most of their long-standing disputes regarding additional supply, payment procedures & subsidy disbursements. We will be swiftly moving towards signing a new PPA InshAllah.”
I am glad to report that the Federal Govt & KE have today agreed upon principles to resolve most of their long standing disputes regarding additional supply, payment procedures & subsidy disbursements. We will be swiftly moving towards signing a new PPA InshAllah.@KElectricPk
— Hammad Azhar (@Hammad_Azhar) May 16, 2021
On the other hand, KE said that its leadership met with members of the inter-ministerial committee and senior government officials and explained the challenges it faced and gave an update on the progress of ongoing projects.
During the meeting, the representatives of the Government of Pakistan reaffirmed their commitment to the people of Karachi and indicated that the PPA would be signed soon.