KARACHI: The government has secured bank loans for power plants which it wants to import on rent for containing a worsening electricity shortfall after giving a guarantee against any default. A review meeting in this regard held here on Monday between the CEOs of banks and Finance Adviser Shaukat Tarin noted with satisfaction that nearly Rs25 billion for around 1,100-megawatt projects has been committed, those who attended the meeting told The News. “About 80 per cent of the financing requirement has already been met,” said Aftab Manzoor, Chairman of Pakistan Banks’ Association. “The government is giving us guarantees.”While the lending portfolio of most of the small banks has little or no exposure to the dilapidated and loss-incurring power sector, the big ones are quite exposed to it. According to their 2008 financial statements, Habib Bank and Allied Bank Limited (ABL) have made eight per cent and 13.8 per cent of their overall advances to the power generation sector, respectively. In the past, electricity generation companies have been marred by their inability to pay off debt after failing to receive payments from distribution companies. The power sector is owned and managed by the government. Even private power producers have guarantees that the electricity they produce will be bought by distribution companies.A multibillion rupee inter-corporate circular debt, settled just months back after the government borrowed over Rs80 billion from banks, was essentially a result of distribution companies, which lose a lot of electricity in the system and are unable to recover bills from consumers. “There is no other choice; we have to lend,” Manzoor said, insisting that rampant power breakdowns have made such investment in the generation sector a national requirement. “Actually it is important for our business. We lend to industries, which need electricity to remain viable.” Incessant power breakdowns have become one of the major factors behind falling industrial production. They have also turned into a bane for authorities who have to deal with angry consumers rioting on streets. However, another participant hinted at banks’ inclination to lend to government-guaranteed avenues when the economy is still reviving. “Well, banks are not worried about advancing to the power sector and it is evident from investments in treasury bills.” Though the government has shown fiscal prudence by containing budgetary borrowing during 2008-09, it has not been able to raise taxes fast enough to meet the debt which is being accumulated. Analysts have warned that the power sector will only be in a position to repay its debt if electricity tariff is increased, a move that is politically difficult. International oil price will also be crucial since expensive fuel oil adds to power tariff, which consumers find difficult to pay, they added.