PD says ready to annul IPPs pacts if NA panel instructs

ISLAMABAD: The Power Division has made a commitment with the National Assembly Standing Committee on Power that it is ready to scrap Independent Power Producers (IPPs) agreements if such a recommendation comes from the committee.

The remarks of the Power Division about IPPs’ contracts came a day before the meeting of the Senate Standing Committee on Power, whose entire agenda revolves around the IPPs. The committee’s chairman is also of the view that Pakistan and IPPs cannot co-exist anymore.

The issue of the IPPs’ pacts came into the limelight in the background of rising electricity prices across the country, hefty capacity payments, uncontrolled circular debt and massive solarization due to load shedding and exorbitant tariff.

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Testifying before the Standing Committee, Secretary Power Rashid Mehmood Langrial presented the overall dismal picture of the country’s power sector whose losses will be Rs600 billion over and above losses approved by the regulator.

During a discussion on generation cost which is the main factor behind the existing tariff, Rana Muhammad Hayat proposed that the IPPs should be strangled and get rid of them.

Responding to Rana Hayat, secretary power said, “we will do whatever the Committee, which is a competent forum, will recommend. The Committee should send us its recommendations for cancellation of IPPs’ contracts, and we will do it.”

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Minister for Power Sardar Awais Ahmad Khan Leghari proposed to the Chairman of the National Standing Committee, Muhammad Idrees, to take up the profile of each IPP individually to know when their contracts will expire. How much payment has already been made to them? Whether the existence of the IPPs is beneficial for the country or it is better to clear all due costs and retire them and what cost the country has to pay if the government decides to get rid of the IPPs.

“We are also working on it and you will get good news in future on this issue,” he added.

The minister was of the view that the cost of hydel projects is included in the tariff from day one, unlike the IPPs which get payment from the date of operations. He said the cost of hydel generation is Rs25 per unit for the first 10 years after which it is reduced.

He said the Power Division according to its own understanding will point out “mistakes” of the power sector along with remedial measures and would seek feedback of the Committee along with members’ own suggestions to sort out those mistakes.

The secretary power explained that the country’s installed capacity is 44,980MW but the effective operational capacity is 22,879MW, of which, hydel effective operational capacity is 7,315MW, RLNG 4,499MW, RFO 1,234MW, coal 4,909MW, gas 1,317MW, nuclear 2,965MW, wind 435MW, solar 104MW and baggasse, 99MW.

According to him, out of 41,980 MW installed capacity, degraded capacity is 37,951MW, capacity discounted for high summer @ 40 degrees is 36,849 MW, capacity discounted for permissible and forced outages is 32,576 MW, capacity discounted for seasonal and daily variation, 28,736 MW, operational capacity is 23,718 MW and capacity discounted for exorbitant marginal cost (Energy Purchase Price).

The Secretary Power further informed the committee that Discos and KE also performing act “Tax Collecting Agents “of the Federal Board of Revenue (FBR) and is collecting Rs700-800 billion per annum, as eight different taxes have been imposed on electricity bills like, income tax, advance income tax, further tax, extra sales tax, retailer sales tax, electricity duty by provinces and PTV fee.

The Committee was informed that circular debt stock stood at Rs2.393 trillion as of June 30, 2024, with an addition of Rs83 billion. The government had given its word to the IMF that it would remain at the level of Rs2.310 trillion but it failed to honour the commitment.

The Minister Power and the Secretary Power apprised the Committee that the government has decided to privatise Discos for which the Privatisation Commission and the World Bank are working closely.

Copyright Business Recorder, 2024