ISLAMABAD-To resolve the liquidity issue being faced by Chinese independent power producers (IPPs) working under China Pakistan Economic Corridor (CPEC), the federal cabinet has approved opening of Pakistan Energy Revolving Fund (PERF) account with the initial deposit of around Rs 50 billion.

The federal cabinet through circulation has approved the Economic Coordination Committee (ECC) of the Cabinet’s decision pertaining to transferring Rs50b worth of budgetary allocations for electricity subsidies to an escrow account for onward automatic partial payments to IPPs including the Chinese IPPs working under CPEC, official source told The Nation. In its meeting last week, the Economic Coordination Committee (ECC) of the Cabinet had turned down a proposal of the Ministry of Energy (Power Division) for operating of Pakistan Energy Revolving Fund (PERF) account by National Bank of Pakistan and instead decided that the account will be operated by State Bank of Pakistan, said the source. 

The ECC has approved Power Division summary regarding “Pakistan Energy Revolving Fund (PERF)” with modification saying that PERF shall be operating with State Bank of Pakistan, Islamabad instead of National Bank of Pakistan, Islamabad, the source said. The decision will pacify Chinese insurance company, Sinosure, and will facilitate the insurance company guarantees for upcoming energy projects in Pakistan. Sinosure was demanding early resolution of Revolving Account Agreement pending between Central Power Purchasing Agency (CPPA-G) and CPEC IPPs since 2017. 

The Government of Pakistan and the Government of People’s Republic of China signed China Pakistan Economic Corridor (CPEC) Energy Project Cooperation Agreement for development of power projects under CPEC arrangement on 8th Nov 2014. Pursuant to the agreement, CPPA and Chinese IPPs agreed on the terms of Revolving Account Agreement (RAA) for CPEC projects. In this regard, Power Division initiated summary on 13 July 2018, however, due to various technical and financial constraints, RAA could not be implemented, said the source. 

The CPEC Authority and IPPs had been raising the issue of delay in Revolving Account at various fora and similar requests from CPEC IPPs were also communicated through the Ministry of Foreign Affairs, the source said. The Ministry of Finance has advised a new arrangement and proposed to open an assignment account under the title of Pakistan Energy Revolving Fund (PERF) till such time matters pertaining to RAA are resolved. The Finance Division further advised that account may be operated by CPPA and allocation may be re appropriated from the existing budget allocations for monthly limit of Rs4b from the account. 

Power Division submitted summary based on the Finance Division proposals for consideration of ECC to resolve the liquidity issue of various IPPs including CPEC IPPs. As per the decision of the ECC, the account for Pakistan Energy Revolving Fund (PERF) would be opened at the State Bank of Pakistan and operated by the CPPA-G. It has also been approved to transfer Rs50b from the finance ministry’s subsidy account to PERF and fixed a monthly withdrawal limit of Rs4b on the account.