The government changed its earlier decision to support solar projects while modifying a policy in favor of the Fauji Foundation to enable the purchase of a stake in a power plant.
The Economic Coordination Committee (ECC) of the cabinet, which is chaired by Finance Minister Ishaq Dar, made the decision.
The ECC accepted the Fauji Foundation’s $4.9 million equity investment in exchange for 2.75 million shares (18.64% interest) in Daharki Power Holdings Limited.
The ECC further waived and excused the Fauji Foundation from the rules outlined in the Foreign Exchange Manual due to its incorporation as a trust under the Charitable Endowment Act of 1980, according to the Ministry of Finance.
As the government permitted the Fauji Foundation to invest $12 million in equity abroad in Daharki Power Holdings in 2008, the Finance Division provided a synopsis.
The Asian Development Bank, the Fauji Foundation, and Daharki Power Holdings, BVI entered into a contract in 2008 that allowed the ADB to execute a put option on the 2.75 million shares it had subscribed for.
The State Bank of Pakistan (SBP), however, believed that the current foreign exchange policy needed to be changed because it did not permit investment.
The SBP considers that despite Fauji Fertilizer being incorporated as a trust under the Charitable Endowment Act of 1980, it does not comply with the Foreign Exchange Manual and needs the ECC’s permission to waive the policy requirement.
According to the central bank, “Fauji Foundation’s total investment in Daharki Power Holdings Limited exceeded the $10 million cap and was at $16.9 million, which also required clearance from the ECC.”
Foundation Power Company Daharki Limited is owned by Daharki Power (FPCDL). Due to its dedicated domestic gas field and thus low tariff, it is a base load plant with 100% dispatch and a total installed capacity of 186 megawatts.
For changes to the Standardized Security Package Documents (SPDs) for the major solar PV projects, the Power Division presented a summary.
The Ministry of Finance reported that “the ECC, following discussion, agreed to the proposals that the indexation of tariff in the SPDs be every year and the payment system for the settlement of invoices as per framework rules.”
According to the framework regulations authorized by the federal cabinet, “70% of the overall tariff will be indexed quarterly with exchange rate variation.”
Additionally, payments under the energy purchase agreement will be secured in “60 days following billing” through bank debit from the designated solar account, in addition to the government guarantees.
However, the ECC approved a new payment method suggested under the security package agreements for the settlement of invoices through the bank from a dedicated solar account to be maintained by the purchaser to be removed and replaced with the regular payment mechanism provided under the earlier ECC-approved agreements in November 2022 while also authorizing the energy purchase agreement and implementation agreement for large-scale solar PV projects.
The decision to index the tariff annually rather than every quarter basis based on rate variation was also accepted. The federal cabinet later approved the ECC’s decisions.
For the project to be effective, the Power Division had suggested that alterations made to the SPDs would be undone to the degree of the indexation and payment mechanism.
The decision was made to assure the project’s viability and based on how the market reacted to the ECC’s aforementioned revisions.
Now that the ECC has linked the quarterly indexation, it has also decided that the payment method for invoice settlement would be bank debit from a special solar account that the buyer will hold, and that will be mentioned in the security package agreements.
To lower the price of tractors, the Ministry of Commerce suggested changes to the Import Policy Order 2022 and laid out a description of the import of agricultural tractors under the Kissan Package 2022.
The proposals of the commerce ministry were adopted by the ECC following discussion, and the relevant clause of IPO 2022 was authorized to be amended to allow for the import of tractors up to five years old.
In terms of reduced import taxes for used tractors, the ECC permitted depreciation at a rate of 2% per month, up to a maximum of 60% as already stated.
The ECC reviewed and approved a description of the policy of business-to-business barter trade systems, particularly in the absence of banking channels and generally to facilitate commerce with other nations. The document was provided by the Ministry of Commerce.
Additionally, the ECC approved an extra grant of Rs 300 million for the Ministry of Energy’s (Power Division) use in PSDP development projects that Peshawar Electric Supply Company is carrying out during the current fiscal year.