ISLAMABAD: The Central Power Purchasing Agency-Guaranteed (CPPA-G) is all set to propose reduction in fuel charges of baggasse-fired Independent Power Producers (IPPs) by Rs 1 per unit in light of recently finalized arrangements with the owners of eight IPPs, well-informed sources told Business Recorder.
This reduction will be proposed during the public hearing on the Fuel Charges Adjustment (FCA) of power Distribution Companies for September 2024, scheduled to be held on Wednesday (Oct 30).
“Yes CPPA-G will propose a reduction of Rs 1 per unit in generation from baggasse-IPPs with retrospective affect, which implies that proposed negative adjustment in FCA of Rs 0. 71 per unit for September 2024 will be over Rs 1 per unit,” said an insider.
Govt inks revised deals with 8 bagasse-fired IPPs
According to the arrangements finalized between the sugar mills owners and GoP rate of bagasse has been revised down to Rs 4500 per unit from Rs 5600 per ton. Deduction will be 5 per cent retrospectively on revised bagasse. The overall financial impact of 5 per cent retrospective deduction will be around 42 per cent of allowed tariff financial implications.
National Electric Power Regulatory Authority (NEPRA) granted 110% increase in the tariff for baggasse-based generation, raising it from Rs 5.9822 per unit to Rs 12.4788 per unit by linking it to international coal prices.
However, the Energy Task Force struck a deal with all eight baggasse-IPPs including the one owned by the Prime Minister’s son. The overall saving from these deals is calculated to be of Rs80 to 100 billion
During the previous meeting of Senate Standing Committee, the Chairman of the Standing Committee, Senator Mohsin Aziz asked when the coal price will be delinked from baggasse.
The Chairman NEPRA stated that baggasse and biomass framework was given in 2019 with approval of ECC according to which the upfront tariff was to be determined by NEPRA and when sponsors opt for the same the PPIB will issue LOS and on 45% plant factor evacuation will be done. It was also stated that fiscal incentives of 2013 policy will also be applicable to this framework.
He stated that the reason for linking it to imported coal values was that if the colorific values of baggasse were to be linked with RFO then its rate was 23.52 and if on local gas then it is 8.1920. Since local gas index was not available so the regulator decided not to link it with local gas so the value of imported coal was used which was a cheaper component at that time and fuel cost complement was calculated Rs 5.772 per unit.
Senator Aziz, asked what was the imported coal price at that time to which Chairman Nepra replied that it was 100 $ per ton.
Chairman Nepra noted that in 2022-23 imported coal price increased abnormally; and as the case was already pending with Nepra the Authority, after a regional comparison especially with India which is using the method of locking the baggasse price with 5% annual increment, decided to lock the price at the imported coal price in the year 2021-22.
At this point the Chairman pointed out that in India they have locked to baggasse price but we have locked to imported coal price to which Chairman NEPRA replied that we do not have the determined price of bagasse.
The Chairman maintained that this was the main issue and sugar mafia is behind this non-determination; and asked if India can determine the baggasse price then why cannot Pakistan. Chairman NEPRA stated that NEPRA does not determine baggasse price so it locked to imported coal price at a time when there was no abnormal increase which is the cheapest option.
The Chairman enquired as to when the price was unlocked to which Chairman NEPRA stated that it was unlocked in 2021-22 and price was determined in February, 2024. The Chairman noted that baggasse is a local raw material then why was the advantage of exchange rate given to a local raw material which shows mala-fide.
He argued that bagasse price should have been linked to the price of sugarcane but some took unfair advantage and did not let the determination happen which could have been done easily.
Chairman NEPRA insisted that when a produce or raw material does not have a regulated price then price cannot be determined on that material.
Copyright Business Recorder, 2024
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