The country has been grappling with market reform, privatisation, liberalisation, and restructuring of the power sector due to its inefficiencies, bureaucracy, mounting circular debt, poor liquidity, and lack of infrastructure and accountability. As arduous as it may be, meeting these challenges are the key for progressing to the ideal market model for power sector.
While it might be just too far away as of now, a recent attempt needs appreciation as being one step closer to the goal; Central Power Purchasing Agency-Guarantee (CPPA-G) has taken the charge of settling electricity dues for buyers and sellers of the power sector as a separate entity. Earlier, this was done under National Transmission and Dispatch Company (NTDC), and CPPA was its subsidiary.
As of now, the separation of roles will keep a check on the circular debt and the lack of transparency due to political patronage. In the bigger picture, the separation of CPPA is a key reform to achieve efficiency through transparent settlement of power sector dues that will fit well with the countrys vision 2020 where the power sector is aimed to turn into a buyer and seller market, and the supply would depend on payment.
Certain aspects of the separation of NTDC and CPPA need to be highlighted. First of all, the step though reformative, is not new; it has been part of the IMF Program from the beginning. Moreover, it is a key feature of power sector reform program supported by the multilateral donors like the IMF, the World Bank and the ADB.
Secondly, the inception of the idea and its incorporation dates back to 2009 by Tahir Basharat Cheema, Energy Expert to APTMA , who was MD PEPCO at that time; it was incorporated in 2009 with its Chief Operating Officer COO being appointed in 2010. However, due to conflict of interest between NTDC and its subsidiary CPPA, the attempt to make CPPA an independent entity waned post 2010.
Now that the CPPA-Guarantee has been made functional, Tahir Basharat Cheema pointed out that the step is definitely in the right direction calling the earlier arrangement a drag on NTDCs operations. While talking to BR Research, he said that it has been imperative to separate the functions and business of settlement and development of the power sector from the generation, transmission and distribution systems.
So whats the clamour by the IPPs about? IPPs under the 1994 power policy have their Power Purchase Agreement (PPA) and sovereign guarantee with WAPDA, while the IPPs under 2002 power policy have PPAs and sovereign guarantee with NTDC. The IPPs governed by PPAs with NTDC are having issues with the new market structure and the license conditions. They believe that they were not made part of the transition.
Also, CPPA-G is like a clearing house that has no assets; the IPPs are wary of the entitys financial health. At the same time the IPPs are also fearful of the lack of capacity of CPPA-Guarantee which would worsen the power sector challenges if timely payments to IPPs are not made. However, experts believe that the outcry will succumb soon as the modification process will only be the novation of existing licenses.
Better late than never, right? Unfortunately, all such reformist moves in the country were not taken with conviction, but external pressures like multilateral donors pushing for this one. People, organisations and institutions generally resist change and development in this country. But the independent power producers are the right to question a transition in operational legalities, and they have to be taken through the novation of existing licenses smoothly. That is the governments job.
Comments
Comments are closed.