After being sidelined in the past couple of weeks by a plethora of commodity shortage and price hike stories in and around Ramazan, news on power crises are back in the limelight. The recent hike in electricity tariffs, effective October 1, and the fears that load-shedding will continue after December, despite several promises, has rung alarm bells yet again.
News reports suggest that the recently concluded meeting of Private Power Infrastructure Board (PPIB) ended with the confession that all rental power plants are not likely to commence operations from the cut-off date, the 31st of December 2009. The power minister has cited the heavy criticism in media and parliament as the primary reason which kept entrepreneurs' at bay from rental power business in the country.
Finance ministry is also believed to be playing a major role in slowing down the process, as it has not yet arranged for the much-criticised, though pre-approved, 14 percent advance mobilisation. Bear in mind that this was the biggest incentive for the RPP's to enter the market but the Finance Minister on a number of occasions has shown his dissent over the approval of advance mobilisation and the approval of RPPs on the whole.
Moreover, the finance ministry has also so far not arranged for the financing mechanism of $3.15 billion for the 2250 MW RPPs. The heavy criticism of the RPPs seems to be behind the lenders' reluctance to fund such a heavy sum of money as their future with each passing day seems to be in jeopardy. The recent action in particular by CCP also seem to have led the lenders give it a second thought than to get $3 billion dollars stuck in such ambiguous circumstances.
Tracking the events, which gave birth to the fears that RPPs might just invite the attention of the judiciary and a rather pro-active CCP, it should be mentioned that the cabinet's approval of 2250MW RPPs was met with heavy criticism as the ECC had only approved for 1500 mega watts. Add to that Pakistan's promise to IMF, where only 800 MW worth of electricity was meant to be generated through RPPs to be absorbed in the FY10 budget.
The alleged lack of transparency in the bidding process, where the tender for bid did not contain the clause of advance mobilisation fund, is just the icing on the cake. Moreover, given the political nature of the issue, it is hard to believe any other government owning and continuing with the RPPs - as distant it may seem, the political instability of Pakistan has the potential to throw any surprise anytime. These should be ample enough reasons for both the RPPs and the lenders to greet the subject with utmost ease.
However, PPPIB in its news release does not seem worried as their Board has expressed satisfaction over the status of power projects under process - hinting nothing in regard to RPPs or the failure to meet their target come December. One wonders if the continuation of load shedding after December is satisfactory to those in the ministry.
On a pleasant note though - if PPIB numbers are anything to believe in then Pakistan will be having a surplus of 339 MW by December end as IPPs adding 1294 MW to the system are expected to be on board. This leads us back to square one: what's the need for RPPs in the first place. But enough said on that already.
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