ECC asked to ban any action against HEC to save the privatization process

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ISLAMABAD – The Ministry of Industry and Production asked the Cabinet’s Economic Coordination Committee (ECC) to order the Ministry of Energy (Energy Division) to advise DISCOs not to follow a path legal or punitive against the heavy electricity complex (HEC) which could jeopardize the privatization process.

In a summary forwarded to the Cabinet’s Economic Coordination Committee (ECC), the Ministry of Industry and Production said that due to the increased cost of inputs coupled with the cash shortage resulting from the privatization process , Heavy Electrical Complex has not been able to fulfill orders worth 1 Rs. 3 billion since July 2018. The Cabinet ECC will consider the summary at its next meeting.

The summary titled Contractual Obligations, available from The Nation, further states that HEC is a unit of the State Engineering Corporation (SEC) working under the administrative control of the Department of Industry and Production. HEC, as a public company, has been manufacturing and supplying high modulus power transformers to distribution companies (DISCO) since 1997. The financial viability of the company has always been a challenge and due to regular heavy financial losses, the Federal Cabinet made its decision dated March 10, 2020, decided to privatize HEC. The privatization process is about to be completed in accordance with the transaction structure approved by the CCoP in its decision of November 16, 2020.

Summary transferred to ECC reveals rising input costs have prevented HEC from filling orders worth Rs 1.3 billion since July 2018

The summary argues that due to the increase in the cost of inputs, HEC is unable to fulfill orders worth Rs 1.3 billion since July 2018. In this context, Faisalabad Electric Supply Company (FESCO) approached the Bank of Khyber (BoK) for cashing out the bank guarantees amounting to approximately Rs 70.42 million.

The same was done at FESCO by Bank of Khyber. It is feared that the remaining DISCOs will also resort to punitive actions, including the collection of bank guarantees amounting to around 201 million rupees due to non-fulfillment of orders. For example, Gujranwala Electric Supply Company Ltd (GEPCO) also approached the BoK for the collection of amounts. It goes without saying that any adverse action, including the collection of bank guarantees and blacklisting, will have a negative impact on the privatization process and the proceeds of subsequent privatization. Opinions and comments of the Privatization Commission (PC), Energy Division. The Finance Division and the Board of Investment (BOI) have been secured in this regard.

Cabinet CEC urged to consider and approve the following proposal

Direct the Ministry of Energy (Electricity Division) to advise DISCO not to take legal or punitive action against the heavy electricity complex which could jeopardize the privatization process.

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