Ministry of Water and Power has accused Independent Power Producers (IPPs) of blackmailing the government under the garb of overdue receivables at a time it is trying to ensure power supply during Iftar and Sehr in Ramazan. Talking to Business Recorder, a senior official of Water and Power Ministry said that consultation with the Ministry of Finance is under way for partial payment to IPPs.
IPPs Advisory Council (IPPAC), in an advertisement, warned the government that since outstanding amounts continue to accumulate, many IPPs are likely to shut down intermittently constrained by their cash flow. The Association "once again urge(s) Prime Minister to release funds now to avoid an increase in load shedding." IPPs had issued a call on the GoP guarantees but withdrew the call as a goodwill gesture when Secretary indicated a desire to mutually discuss and resolve all pending issues.
Though Ministry of Water and Power corresponds with the IPPAC officially the Water and Power Minister Khawaja Asif recently declared the Association illegal. PPIB, which deals with the private sector power projects, had also issued a contempt notice to IPPAC. Water and Power Ministry, the official said, has already requested Finance Ministry to release Rs 50 billion to pay outstanding dues to IPPs, adding that as the amount is made available it will be released to IPPs.
IPPs have held two meetings with the new Secretary Water and Power, Yousaf Naseem Khokhar. According to the IPPAC, as of May 15, 2017, the payables to 21 member IPPs are around Rs 191 billion due to which the industry is once again reaching a point where cash flow crises are starting to affect operations.
However, the official of the Water and Power Ministry claimed that the payables are Rs 121 billion not Rs 191 billion, which shows a gap of Rs 70 billion. The official confirmed that IPPs were facing payment issues and acknowledged that their dues are accumulating but argued that this doesn't mean they should start pressurising the government. According to IPPAC, issues fall in four categories: (a) overdue receivables, (b) contractual violations, (c) tax issues, and (d) legal disputes in arbitrations/courts.
IPPAC with reference to contractual issues states that a meeting has been held with NTDC/CPPA teams to resolve the issue bilaterally and to ensure compliance with the contracts. On the tax issues, Secretary had promised that he would follow up with FBR and Ministry of Finance and try to find solutions, through the Finance Bill or otherwise. IPPs are waiting for further instructions on that matter. On the issue of arbitration, the Secretary had indicated limited ability to resolve at the level of Ministry of Water & Power and IPPs had simply reiterated that they would remain available if the GoP, as a whole, wishes to resolve this issue bilaterally.
In the last meeting with the IPPs, both Secretary and the Minister for Water & Power had promised some major payments prior to Ramazan. "As of May 15, 2017, the payables to member IPPs (21) are around PKR 191 billion. The industry is therefore, once again reaching a point where cash flow crises are starting to affect operations. We further submit that all the IPPs have major debt repayments coming due next month which they may default, if not paid soon," said one of the IPPs' representatives.
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