Federal cabinet approves payment of Rs82b to OGDCL after 12 years

Amount was taken as loan by Power Division

ISLAMABAD   -   After almost 12 years, the federal cabinet has approved the payment of Rs 82 billion to Oil & Gas Development Company Limited (OGDCL) that was taken as a loan by Power Division.

The financing facility of Rs82 billion was executed between Power Holding Limited (PHL) and Oil & Gas Development Company Limited (OGDCL) in 2012 on the terms and conditions approved by the Finance Division, and the purpose of funding was repayment of liabilities of power distribution companies (DISCOs) and settlement of inter-corporate circular debt of the power sector, official source told The Nation.

As per the terms and conditions of the financing agreement, Rs82 billion facility was executed for a period of seven years (till 2019) including a grace period of three years, payable semi-annually. Consequently, principal portion of the subject facility was payable in eight equal installments commencing from March, 2016. As per agreement, liquidated damages @ 20% per annum are also payable on delayed payments of either or both the principal and mark up.

However, the installment amounts on account of principal repayments and mark-up were not paid on the due dates and consequently liquidated damages started accruing. In order to regularize the default, ECC of the Cabinet on July 25, 2017 accorded approval for extension in the tenor of the subject facility for a further period of three years till March 10, 2022. However entire principal portion of Rs82 billion against the subject facility is still outstanding while mark-up amounting to Rs19.392 billion has been paid so far, said the source.

The ECC in 2020 approved the conversion of Rs82 billion OGDCL facility to public debt and an amount of Rs82 billion has been allocated in the federal budget for FY2023-24 for settlement of ensure principal portion of the subject facility. The payment of over-due principal is planned to be released to OGDCL till June, 2024 and consequently entire principal portion shall be settled. However, the validity period of the executed agreements has expired and therefore in order to regularize the matter of overdue principal, overdue mark-up and waiver of liquidated damages, a supplemental agreement needs to be executed between PHL and OGDCL on the existing terms and conditions with tenor be extended till settlement date of the facility.

Earlier, the Power Division had presented various proposals to ECC of Cabinet and recommended payment of Rs82 billion on account of principal, to pay markup calculated as per markup rate agreed in original agreement till the date of payment. Waiver of 20% LDs will be imposed after redemption date (every six months after issuance of TFC). The markup amount shall be paid without any markup on markup by CPPA through PHL in 12 equal installments starting from July 2025. These monthly installments shall be paid on or before 25 of each month. The Economic Coordination Committee (ECC) of the Cabinet had approved the Power Division proposal regarding the roll-over of the finance facility between PHL and OGDCL amounting to Rs.82 billion till June 2024 and approved the proposal contained at para-8 of the summary. The source said that the federal cabinet has approved the payment of Rs 82 billion to OGDCL.