The government is likely to exempt dual-fired new Independent Power Producers (IPPs) from income tax as part of its policy to minimise burden on the consumers, well-placed sources in the Private Power Infrastructure Board (PPIB) told Business Recorder.
"We have submitted a summary to the Economic Co-ordination Committee (ECC) of the Cabinet, proposing that new IPPs should be exempted from income tax, which is basically the liability of end-consumers," the sources added.
Sources said the summary has been submitted a few days ago and it was not sure about its consideration in the next meeting of the committee. But what the sources confirmed is that in case of non-availability of additional gas to the IPPs, the impact of furnace oil or any other (alternative) fuel would be passed on to the consumers.
According to the Ministry of Petroleum and Natural Resources, gas for new power generation plants is available up to 2010-11 on nine-month basis.
The available quota in SNGPL system for this period would be 94 mmcfd which was just sufficient for 450 MW whereas the country's power shortage would stand at 5,500 MW.
"The PPIB fears that non-availability of gas will lead to failure of future power projects, ultimately resulting in power crisis in the country," the sources said, adding the Board could not process at least 25 unsolicited raw-site proposals of 3,964 MW cumulative capacities.
All the issues pertaining to power shortage have been discussed at all levels and efforts were being made to materialise additional power from the new and existing IPPs by the end of next year, the sources maintained.
Sources also said the payment mechanism had been significantly improved from the 1994 Power Purchase Agreement (PPA) and now capacity payments would be determined on hourly availability basis, and would be made only when an IPP generation is available for despatch.
They said there was a general agreement with the PPIB that it would not be possible to test the availability of power with each IPP unless it was actually despatched. However, it was proposed that reasonable incentives and penalties should be fixed for the companies so that they could declare accurate availability and remain available in low-water months.
Sources quoted PPIB's adviser West Jr as saying that uncertainty about availability of gas/furnace oil would render these projects unfinanceable. He said that firm commitment for supply of gas should be made as an alternative, and it should be assured that whenever gas is not available, in case of dual fuel projects, the cost of alternative fuel may be allowed as a passthrough by Nepra.
"In case Nepra does not allow the passthrough of the cost, the Government of Pakistan should take the responsibility to make up the difference between the costs of the two fuels," sources quoted West Jr as saying. Sources said seven IPPs which expressed their interest in expanding existing capacity up to 1,547 to 2,072 MW, have asked the government to provide gas for the expansion projects, besides seeking procedures for passthrough of alternative fuel cost.
As the ECC approves the proposal regarding income tax exemption for the upcoming dual-fired power plants, it would be notified by the Central Board of Revenue (CBR), the sources added.
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