The government has agreed to extend sovereign guarantee for power projects below 50MW, after strong protest by NWFP and AJK, which expressed their inability to develop the projects with the existing policy, official sources told Business Recorder.
This decision was taken by the Economic Co-ordination Committee (ECC) of the Cabinet on a summary submitted by the Ministry of Water and Power. The Ministry said that the policy for power generation projects, 2002 stipulated that provinces would manage investment for power projects up to 50 MW and federal government would support projects above 50 MW.
But as the government would not extend guarantee for power projects below 50 MW, this created problems for the provinces, especially NWFP and Azad Kashmir, sources said.
They said that NWFP and AJK approached the Private Power and Infrastructure Board (PPIB) regarding the problems in attracting investment in power sector according to the policy which barred federal government from extending guarantee for projects below 50 MW.
"The governments of NWFP and AJK expressed concern that without guarantee as was being provided for projects above 50 MW it would not be possible for them to support hydro power projects," sources added.
The Ministry proposed that guarantee being extended to projects above 50 MW may also be extended for projects below 50 MW, provided the power purchaser was a federal entity and the tariff was approved by National Electric and Power Regulatory Authority (Nepra).
Sources said that the federal government was also incorporating amendments in ''Power Policy 2002'' for giving representation to provinces in PPIB, and slashing project processing time and granting tax exemptions to dual-fuel power projects.
"We are proposing to scrap ''Secretaries Committee'' and giving representation to provinces on the board, beside awarding projects on international competitive bidding (ICB)," they added.
Prime Minister Shaukat Aziz also expressed annoyance over the performance of PPIB and Nepra, saying that amendments were being made in structures of the two bodies to make them professional.
They said it was also being considered to give 50 percent representation to private sector on PPIB board as the Prime Minister recently wrote a letter to the Ministry of Water and Power advising that private sector should be given equal representation on the board.
Sources said that tax exemptions were being proposed for dual-fuel projects as the Ministry of Petroleum had indicated that availability of gas to power generation projects could be ensured only up to 2011.
When gas availability was limited to thermal power stations and electricity demand was increasing in southern Punjab, installation of dual-fuel projects was the best solution to deal with increasing electricity demand.
Private Power Infrastructure Board (PPIB) in one of its summary had argued that the lenders and investors would not finance the project unless fuel supply was secured on long-term basis (15-20 years).
Keeping in view the apprehension of investors and lenders, the Ministry of Water and Power is proposing that tax exemption be extended to include dual-fuel power plants due to non-availability of gas, sources added.