Overdue payments of IPPs resurge to Rs205 billion

LAHORE: Overdue payments of independent power producers (IPPs) increased to Rs205 billion by the end of November as government is dragging feet on clearing its recurring payables, industry officials said.

Alone in November, the amount government owes to IPPs stood at Rs10 billion. Independent Power Producers Advisory Council (IPPAC), the key body representing private sector’s electricity producers, urged the Prime Minister to intervene into what they called the ‘serious financial’ crisis they are facing due to overdue receivables from National Transmission and Despatch Company (NTDC) and Central Power Purchasing Agency.

“This (request) is in continuation to our previous letter dated November 15 and as highlighted in the previous letter, the overdue amounts payable to the 20 members of the IPPAC is still outstanding and growing every month,” the council said in a letter, available with The News.

“Since our last correspondence, the overdue amounts have risen from Rs195 billion (as of October 31) to Rs205 billion (as of November 30, 2017).” IPPAC further said IPPs have been requesting the ministry of energy for long to find out an amicable solution to the overdue payment issues.

“However, the Ministry of Energy has not been able to resolve these issues,” it added. “We would like to again emphasise that many of the IPPs are now so cash-strapped that they cannot timely service their respective financial obligations to their lenders, operators, fuel suppliers and other third parties.”

In November, the London Court of International Arbitration awarded more than Rs14 billion to IPPs in Pakistan in a dispute on overdue claims with the NTDC. The court issued final award on October 29 after the NTDC’s failure to comply with a partial award issued in June or move before the arbitration within 75 days. The state-owned NTDC challenged the award.

“This matter has been pending for over six years now, and needs to be closed to avoid tarnishing of the image of government in honouring its contractual commitments,” the council’s letter said.

The present government soon after assuming power in 2013 settled a whopping Rs480 billion in circular debt that involved the whole energy chain from oil refineries, suppliers, producers and distributors to consumers.

In 2015 when circular debt issues resurfaced the government prepared a circular debt management to reduce the amount to Rs212 billion by the end of the current fiscal year from Rs314 billion recorded at the end of June 2015.

Industry officials said the target is least likely to be met keeping in view rising trend in amount of circular debt nowadays. IPPAC said there is also general sales anomaly as the rate is 20 percent on furnace oil as against 17 percent on electricity. The issue is also unresolved for over three years now “and despite repeated follow ups, no attention has been paid to this issue either”.

Non-payment or irregular payments to power producers are adding to circular debt, which is adversely affecting energy sector to great extent. The country has been facing this menace since 2007.

Officials said circular debt has crippled the economy as overall revenue shortfall cascades through the entire energy supply chain, resulting in a shortage of fuel supply to the power producers and IPPs and decreasing power generation and increasing load-shedding.