The government is likely to constitute a committee under the chairmanship of Minister for Power, Omar Ayub Khan to negotiate with Independent Power Producers (IPPs) for waiver of capacity charges of CPPA-G voluntarily to lower cost of generation, well-informed sources told Business Recorder.
The Central Power Purchasing Agency -Guaranteed- the electricity buyer, pays approximately Rs 45 billion per month(Rs 550 billion per annum ) to the IPPs which are ultimately passed on the consumers. It is one of the components of circular debt besides mismanagement and poor performance of power sector.
In July last year, National Electric Power Regulatory Authority (Nepra) had proposed the constitution of a high level Commission on matters relating to Residual Fuel Oil (RFO), capacity payment and indexation given to Independent Power Producers (IPPs).
Nepra had suggested that the commission consist of experts from international financial institutions, legal and engineering consultants, in addition to officials from National Accountability Bureau (NAB), Finance, SECP, and Ministry of Energy.
Prime Minister, Imran Khan maintains that status of power sector is a major challenge for the government and is the areas of prime focus during a recent meeting of federal cabinet; he further stated that the complexity of power sector required disaggregation of various issues for the purpose of presenting them before the cabinet. He cited the subsidy given to the tube-wells in Balochistan was one such issue which required detailed deliberations. While referring to the seemingly intractable problem of circular debt he gave the example of Turkey which had resolved this issue.
Some of the cabinet members were of the view that the response of Power Division on high cost of electricity with special reference to variance in guaranteed rate of return to IPPs was evasive as it shifted the onus on the report by the Commission constituted under Muhammad Ali, former Chairman SECP.
Power Division assured the cabinet that the report of the committee working under the chairmanship of former Chairman SECP is near completion and if the findings of the committee indentified any wrongdoings, Power Division would proceed against the delinquents, accordingly.
However, one of the senior officials of Power Division told Business Recorder that if the value of dollar was equal to Rs 50 at the time of agreement it is now Rs 166 against one US dollar. He, however, was of the view that this issue can be discussed with the IPPs amicably to convince them to review their agreements in the best national interest as they have already earned what they spent .
Chairman Nepra, in a meeting with the Prime Minister, which became a cause of conflict between the Power Division and the regulator, had also suggested that the government sits with the IPPs for renegotiations on mark-up on delayed payments as one per cent reduction would provide a saving of Rs1 billion per year for every Rs100 billion payable. At present about Rs600 billion delayed payments are currently payable to the IPPs as of Dec 31, 2019.
On the other hand, IPPs argue that they negotiated a win-win deal with the government, according to which billions of rupees financial benefit will be given to the government. However, the deal is yet to be cleared and IPPs are now are on the verge of default as government is not paying over due amounts.