Prime Minister Yousuf Raza Gilani is reported to have expressed concern during Cabinet meeting on August 26, 2009 that the government would not be sustainable after December 31 if power shortage was not bridged through installation of rental power plants (RPPs), sources told Business Recorder.
He expressed concern while reviewing the decisions taken by the Economic Co-ordination Committee (ECC) of the Cabinet in its meetings on August 11, 18 and 21. RPPs tariff is higher compared to the independent power producers (IPPs), or such is the focus of some political parties including PML (N) and PML (Q). However, the government believes that it has to take bold decisions, without any fear of blackmail by opposition parties.
"The situation has distorted the government''s image, and there is an urgent need for bold political decisions to resolve the energy crisis which has badly impacted on agriculture and industrial sectors. Priorities have to be determined keeping in view the fact that it will be very difficult for the government''s own sustainability if load shedding persists," sources quoted the Prime Minister as saying.
During discussion on the decisions of the ECC taken in its meeting on August 21, 2009 relating to RPPs, the Cabinet was informed that the government would accord top priority to end load shedding in December 2009. The Ministry of Water and Power stated that RPPs issue was an extremely difficult option as an additional raise of 6 percent in tariff would be required over and above the increase of 26 percent already agreed with the IMF as constituting subsidies.
With regard to serious reservations expressed in the press and alleged corruption charges in RPPs deals, the Cabinet was apprised by the Ministry of Water and Power that all projects were processed through International Competitive Bidding (ICB) in a transparent manner, sources added.
There was an impression in the Cabinet that increase in tariff would not be acceptable to the general public. The Cabinet, however, said that this was time to take bold decisions, either to live with load shedding or get rid of it, sources added.
After detailed discussion, the Cabinet endorsed the decision of the ECC of August 21, which said that "various least cost options, including availability of gas to generate 750 MW may be presented before the Cabinet for consideration so as to mitigate load shedding by the end of December 2009".
The Cabinet also decided that in order to fulfill the promises made to the general public and to increase the industrial and agricultural productivity, all resources would be mobilised to end load shedding by December 31, 2009. Accordingly, while approving the additional request of 750 MW, as calculated by the Ministry of Water and Power, it was decided that options for increase in tariff would be worked out by Finance Ministry.
Finance Minister Shaukat Tarin recently had apprised the ECC that the government and the International Monetary Fund (IMF) had agreed on RPPs--of 800 MW. This claim has not been officially supported by the IMF. Meanwhile, the Prime Minister announced that RPPs would be validated by the IMF as the third party, which was later denied by Finance Ministry with comments that third-party validation would be provided by Asian Development Bank (ADB), instead of IMF.