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LAHORE: The federal government is considering a blanket ban on new imported fuel-based power projects, said Pakistan Electric Power Company (Pepco) sources.

The imported fuels are earmarked as RLNG and coal and the policymakers are intended to facilitate and expedite maximum production at Thar to bring down the per ton cost of indigenous lignite and resultant power tariff from Rs 10 per unit to Rs 5 per unit in subsequent phases, the sources added.

At present, the energy mix is to be based on hydel, local coal, nuclear, solar and wind and LNG being used inefficiently in domestic market.

Also, they said, the government is considering seriously of decentralization of power from centre to provinces. The Boards of Directors and managements of individual companies would be handed over to the provinces under an incentive-and-performance-based public-private partnership (PPP) model.

Sources have further pointed out that the federal government is also considering to convert the power purchase agreement of Hubco's 1200MW old plant set up before 1994 power policy into a 300-600 million imperial gallons per day (MIGD) water purchase agreement with the Karachi Water and Sewerage Board, backstopped by government guarantee as an exception to the rule given its pioneer status at an indicative tariff of 50 paisa per gallon.

Also, all government-owned power generation companies, not earmarked for retirement, would be auctioned for operation and management contracts to private sector under an improvement-sharing payment structure.

They said there is a little success towards management contracts for turnaround of state-owned entities (SOEs), which ultimate has left the government with no option but to initiate privatisation of the power sector. Therefore, the added, the government is considering of exempting all energy sector investments from the scope of the National Accountability Bureau (NAB).

Under the plan, all power transmission projects would be financed under the public-private partnership mode under open access policy with funding from yield co investors on the pattern of shared telecom tower infrastructure business model.

So far as circular debt is concerned, they said, the primary payment commitments would be transferred from Central Power Purchasing Agency-Guarantee (CPPA-G) to various other private sector parties on a power commodity exchange within the next 18-24 months and the federal government would be responsible for only backstopping the "residual" capacity payment obligation subsequently.

Sources have further pointed out that the reconciled net outstanding circular debt amount is planned to be settled through a 10-year Government of Pakistan Sukuk that the final intended recipients may choose to also monetize on the stock exchange. The key principle is not to recover the added cost of previous inefficiencies from paying customers in the tariff.

Copyright Business Recorder, 2020

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