ISLAMABAD- The government is likely to provide guarantees for Rs 15 billion-syndicated loan for power generation and distribution companies to pay off dues to oil and gas sectors after commercial banks' refusal to entertain their request without sovereign assurance. Economic Coordination Committee of the Cabinet, which will meet today (Tuesday), is taking up a summary of Water and Power Division, seeking the sovereign guarantees for Rs 15 billion-syndicated loan from the commercial banks to retire the arrears of oil and gas companies, said reliable sources. These arrears have accumulated over the time on account of cost difference between electricity generation and distribution. "The power generation and distribution companies have already pledged whatever assets they had to obtain Rs 168 billion loan to pay their dues", said sources in the Water and Power Ministry. They said the commercial banks had conveyed to the power generation and distribution companies that new loans would be sanctioned after getting sovereign guarantees. The authorities obtained a loan of Rs 30 billion a few weeks back by pledging National Transmission and Dispatch Company (NTDC), said the sources and added, "Nothing significant is left to pledge, that was why we were asking for the government intervention". The earlier loan of Rs 168 billion was utilized to clear most of the dues of Independent Power Producers, Hub Power Company Limited, Pakistan Power Electric Company, Pakistan States Oil and Sui Northern and Southern Gas Companies. Any further delay in arranging money to meet financial obligations will deepen the power crisis, as the nonpayment of dues to the oil and gas companies will severely hit on power generation capacity. The people are already facing 6 to 8 hours' load-shedding in 24 hours. The sources regretted the officials concerned could not frame a proper mechanism of subsidies payment and retiring loans, which was making borrowing expensive and directionless. The fiscal issue is becoming a primary cause of power sector deterioration, and its severity is also negatively affecting the overall fiscal position of the national budget. The power subsidy payments budgeted and to be paid by the government, have reached unsustainable levels due to sharp increase in the international oil prices. Consequently, the power sector subsidies, the differential between the National Electric Power Regulatory Authority determined and government's notified tariff, have grown substantially by more than 400 per cent from the budgeted amount of Rs 25 billion to actual Rs 133 billion during the last fiscal year. The delayed subsidy payments by the government have created cash problem in the power sector, making the power distribution companies unable to pay their liabilities including purchase of electricity as well as limiting maintenance, augmentation, and expansion funding. This cash shortfall has spilled into power generation companies, rendering them unable to pay for the fuel deliveries. The oil and gas producers are being partially paid by the fuel distribution companies. As a result, a serious circular debt problem has emerged between the power utilities, fuel suppliers and the engineering industry. International donor agencies are recommending the government to overhaul its power sector. These donor agencies recommend that financial sustainability can only be achieved once tariff is rationalized, subsidies are phased out and balance sheets of the entities are cleaned. Poor business practices have contributed to the build-up of the financial crisis, which has significant repercussions on the country's economy. Water and Power Development Authority (WAPDA) is at the centre of a public sector circular debt problem, in which state firms and government ministries have failed to pay power bills, while WAPDA has failed to meet financial obligations to them and to private sector creditors. The ECC would also consider a summary of Board of Investment, which has sought special incentive package for attracting investment in Special Economic Zones. The BOI would give a detailed presentation on the subject. The Ministry of Food, Agriculture and Livestock will put forward a summary to modify the basis for grant of subsidy on fertilizers. Likewise, the Ministry of Industries, Production and Special Initiatives has demanded of subsidy on phosphate and potassium to promote a balanced use of fertilizers. The Commerce Ministry has sought continuation of Research and Development support to leather and footwear sectors.