Capacity payments: Imran Khan govt extended favour to some IPPs: minister

ISLAMABAD: Minister for Power, Sardar Awais Ahmad Khan Leghari on Tuesday accused detained former prime minister Imran Khan’s cabinet of extending favour to seven to eight Independent Power Producers (IPPs) through amending arbitration clause in agreement instead of starting further probe in light of recommendations of Muhammad Ali’s report on IPPs.

Power Minister shared this information in reply to a question raised by Senator Syed Shibli Faraz, opposition leader in Senate at a meeting of the Committee presided over by Senator Mohsin Aziz.

Minister said that there are four aspects of a project; i.e., fixed charges (capacity charges) which are based on interest, interest on interest, Return on Equity (RoE) and fixed O&M, and these can be played around to find some space to earn less or more, legally or illegally.

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He said one and a half month before the ongoing sit-in, Prime Minister Shahbaz Sharif issued instructions leading to serious ongoing work on these four aspects and a comprehensive report will be shared with the Committee. It has been initiated as a study and each aspect of the agreement is being looked into minutely.

The minister argued that reference was made to the forensic report of 2019 or 2020 of Muhammad Ali, newly appointed Special Assistant to the then Prime Minister. He said, Muhammad Ali’s report was preliminary work and as per record he did not conduct heat forensic of those projects.

“Please note, Muhammad Ali report was preliminary and went through some of the IPPs, whose heat rate had not been conducted, and it had suggested further probe and investigation,” he said, adding that a full-ledged audit of the matter should be conducted.

Minister argued that the author himself has acknowledged that he could not reach a final conclusion, and suggested that the matter needs further probe and investigation and full-fledged audit of the entire matter be conducted.

However, PTI’s government on the basis of that report started negotiations with IPPs on Master Agreements and presented it before the Cabinet which changed the platform of arbitration due to which further investigation of that issued stopped.

“If PTI government had further investigated the matter on the basis of Muhammad Ali Report, it could have provided basic platform to get excess earned money back and do away with those IPPs but that process was not done. When you surrender your right of international arbitration and proceed half way, this inflicts further financial loss on the people,” the Minister added.

Minister assured the Committee that whatever benefits, even Rs 5 per unit from IPPs contracts, will be passed on to the public.

However, according to sources, during in-camera briefing, Power Division apprised the Committee that a comprehensive audit of all factors of IPPs contracts is under way and all tools will be used to bring their profits down to lower the existing tariff.

Other relief measures to be given to consumers were also shared with the Committee but kept secret due to the understanding with the IMF.

The Committee was informed that capacity payment is limited to currently installed capacity of 39,000MW as a few plants have already been retired.

Standing Committee was further informed that five expensive plants of 2500-MW are also shut down. Guddu Power Plant and Nandipur plant are being privatised, Discos will be privatised and electricity market will be opened as government wants to do away with electricity business.

Secretary Power briefed the Committee that out of 236 billion units’ generation per annum, the country uses only 130 billion units due to which the government is compelled to pay capacity payment for 100 billion units.

He said K-Electric is generating expensive electricity due to which federal government has earmarked subsidy of Rs 170 billion for FY 2024-25.

Power Minister said that 230-MMCFD gas is being supplied to captive power plants which will be diverted to power sector to lower consumers’ tariff.

It was further stated that local industry cross-subsided domestic consumers with Rs 244 billion which has now been reduced. Domestic consumers using up to 400 units per month are given a subsidy of Rs 595 billion which has now reached Rs 692 billion.

Minister said that Rupee/ dollar parity, KIBOR and LIBOR are main factors behind current hike in capacity payment of power plants.

In reply to a question, Power Division informed the Committee that free electricity of Rs 15 billion is being given to 190,000 employees of WAPDA, Discos and Gencos.

Furthermore, the Secretary (Power Division) highlighted the power sector reforms, electricity supply and demand, and generation capacity, complexities of capacity planning, and staggering / abolishment of committed power plants.

Chairman of the Committee, emphasised the importance of resolving the issues with IPPs, which have become a significant burden for the nation. He highlighted that the primary problem is overpricing, making electricity unaffordable for the common man.

Copyright Business Recorder, 2024