ISLAMABAD (June 27 2009): The Finance Ministry is likely to deduct Rs 36 billion, at source, from funds earmarked to federal and provincial governments to clear their dues to the financially sick Pakistan Electric Power Company (Pepco), official sources told Business Recorder. PEPCO HAS TO RECEIVE THE FOLLOWING: from Punjab Rs 2.554 billion, NWFP Rs 1.021 billion, Sindh Rs 15.392 billion, Balochistan, Rs 1.335 billion, and GoP share at the rate of 30 percent of the cost to agriculture tube-well consumers in Balochistan Rs 4.626 billion, and AJK share at the rate of Rs 2.32 per unit or a total of Rs 2.813 billion. Besides, the provincial governments have to pay Rs 3.318 billion as their share of subsidy being provided to the private agriculture consumers. Federal government and its agencies are defaulters to the tune of Rs 5.052 billion up to May 30, 2009. Sources said that federal and provincial government departments and agencies are not regular in making payment of electricity dues on monthly basis. They also routinely, after passage of several months, agitate that bills are incorrect/excessive and do not pay them on one pretext or another, and subsequently undertake reconciliation exercises with provincial government departments and the amount outstanding stands reconciled at the time of reconciliation. Thus, by making part payments, they repeatedly request for reconciliation. According to Pepco, non-payment by the concerned departments has hampered not only improvement in the provincial system but has also hampered prompt payment to NTDC, which threatens the financial position of NTDC and consequently of the entire power sector of Pakistan. As a consequence, NTDC is unable to pay dues to IPPs, gencos and Pepco hydel for electricity purchase. This position is further compounded by the fact that gencos are unable to pay for fuel oil purchase, and the IPPs have threatened to call the GOP sovereign guarantees. "Such action will have disastrous consequences for the national economy," said one official of Pepco. To resolve this issue, the federal government is establishing \'Power Holding Company Limited\' (PHCL) which would pick up Rs 126 billion burden of circular debt of distribution companies (discos) and generation companies (gencos). "Holding Company will pick up all the debts of discos and gencos so that their balance sheets are cleared before June 30, 2009," sources added. On May 10, 2009, International Monetary Fund staff mission on Pakistan, in a statement issued after deliberation over Pakistan\'s economic performance, had indicated that a plan to deal with the circular debt (inter-corporate debt in the energy sector) is expected to be finalised soon, but did not give the exact deadline. However, official circles are of the view that the government has to shift the circular debt to the accounts of PHCL before facing the IMF staff mission in the meeting scheduled to be held in July in Turkey, not in Dubai. A couple of months ago, Pakistan Electric Power Company (Pepco) had floated Term Finance Certificates (TFCs) amounting to Rs 87 billion to pay outstanding bills of fuels suppliers and independent power producers (IPPs). Key advantage of setting up of a holding company is that cash transfers are not involved and only book adjustments would be made in the accounts. Sources said that the main beneficiary of the process would be Pakistan State Oil (PSO), as it had recently lodged an SOS complaint to the government that it feared its LCs might default due to liquidity problem associated with the circular debt.