The Ministry of Water and Power has reportedly been unsuccessful in convincing Finance Minister Senator Ishaq Dar to support the policy framework for laying of transmission lines to load centres through private investment, well informed sources told Business Recorder.
A couple of months ago, Minister for Water and Power Khawaja Asif had announced the completion of transmission lines on the IPP mode, but officials in the Ministry of Water and Power opposed the plan, saying that any such plan would be an attempt to compromise interests of the state. However, the Minister for Water and Power continued to emphasise giving projects of billions of dollars to the private sector on IPP mode.
According to sources, the Ministry of Water and Power had sought the comments from all stakeholders with only a few not agreeing to the proposal in the summary.
The sources said the Federal Board of Revenue (FBR) and provincial governments did not send their comments on the summary. However, those stakeholders including the Finance Ministry which sent comments either raised observations or recommended amendments to the summary, saying that the summary is ambiguous.
When the summary came under discussion in the Economic Co-ordination Committee (ECC) of the Cabinet on May 16, 2014, the Finance Minister observed that the comments of all the stakeholders have been obtained on the very important proposal. But he turned down the summary saying that instead of giving upfront tariff for transmission lines project, international competitive bidding model should be considered in order to take the country onto the right path. He said that in finalising policy framework for transmission lines project by the private sector all stakeholders including Law Division should be consulted and the policy framework should be resubmitted to the ECC.
The government has planned a large scale capacity addition in power generation in the next few years which necessitates corresponding augmentation in the transmission network.
Further 6,600 MW power generation projects at Gaddani Power Park will also require the HVDC transmission line from Gaddani to the load centre in the north of the country.
Due to the encouraging response of the private sector and constraints on public sector resources, it was considered necessary to invite private sector for investment in the new transmission lines.
In order to formulate the policy of attracting private sector in the transmission line projects, a committee was constituted by the Ministry of Water and Power under Secretary Water and Power with representation from all stakeholders including from provinces and private sector.
After discussions and deliberations, the committee finalised its recommendations and accordingly the "Policy Framework for Private Sector Transmission Line Projects" was prepared. The salient features of the policy are as follows: (i) list of transmission system projects to be offered to private sector will be prepared by the GoP; (ii) the policy will be based on Built-Own-Operate- Transfer model for 25 years; ( iii) policy to cover transmission line & grid station projects of 220 KV voltage level and above (EHVAC&HVDC); (iv) land and legal right of way to be provided by NTDC; (iv) equity 18 per cent; (v) transmission utility (NTDC) will pay transmission service charges; (vi) project to be awarded through International Competitive Bidding (ICB) or under upfront tariff to be announced by Nepra; (vii) fiscal and financial incentives according to the policy for power generation projects 2002 including exemption from corporate income tax and application of five per cent flat customs duty; (viii) utility will provide basic design and functional performance specifications in RFP; (ix) standardised security package ie Implementation Agreement (IA) and Transmission Service Agreement (TSA) to be developed; and (x) PPIB will provide one window facility.
Hussain Sharif, a power sector expert told Business Recorder that setting up imported coal-fired super critical technology power plants of 660MW each in Punjab and Gaddani is a promising endeavour but its result will not be visible for the next five years.
To set up each unit of 660 MW a capital investment of at least $750 million is required, if not more, excluding power execution projects.
To support the coal fired projects plan the following infrastructure needs to be built / strengthened: (i) port facility for imported coal; (ii) railway network and rolling stock for transportation of coal to power plant sites; (iii) perennial water availability for each unit of 660 MW would need 20-25 cusecs; (iv) road network for transportation of construction materials and capital goods; (v) transmission network (400/220kV) to evacuate power from the power plant and to the consumption centre/s over long distance; (vi) distribution network (66kV/32kV); (v) trained manpower to augment skills to enable operate high pressure coal based power plants; and (vi) financial infusion as typical IPP would need 70 per cent debt and 30 per cent equity tie ups on non-recourse basis.
Sharif argued that by merely laying foundation stones of power plants is giving false hope to the teeming millions.