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Sub-committee formed to negotiate ‘overpayments’ to IPPs

Business

June 7, 2020

KARACHI: The government has constituted a sub-committee for negotiation with independent power producers for recovery of a gigantic Rs5 trillion ‘overpayment’ to them and renegotiating formula of their profits, it was learnt on Saturday.

Babar Yaqoob, chairman of Federal Land Commission of Pakistan was nominated as the chairman of the subcommittee. Its members include barrister Qasim Wadood and Muhammad Ali, former chairman of the Securities and Exchange Commission of Pakistan. Secretary of the committee would be decided by chairman of the negotiation committee.

Ali presided over an investigation team that formulated a report on Rs5 trillion overpayments to IPPs in the past.

The subcommittee is mandated to engage with various IPPs to negotiate on the amounts, rational and mechanism of excess payments of the past under specific heads as well as due to systematic oversight highlighted in the reports, reduction of interest rates and payments on debt and other components, extension of debt tenor and agree on changes required to ensure avoidance of these payments in the future, according to the terms of reference (TOR) of the ministry of energy seen by The News.

“Excess payments are not restricted to the ones highlighted in the report and the negotiations committee may look into the excess payments, which may not have been covered in the report,” an official document said.

However, IPPs contested the malpractices in limelight and demanded a forensic audit.

The Cabinet Committee on Energy led by Planning Minister Asad Umar, last month, decided to constitute the committee to resolve the capacity payment issues.

Under the TOR, the subcommittee would further negotiate on a claw-back mechanism for sharing efficiency and other gains and savings in the future between power purchasers and IPPs. “These may be subject to verification of various costs, implementation of cost accounting order, and audit as the negotiation committee deems fit.”

The body would negotiate with IPPs with respect to modalities and mechanism for shifting from take or pay contract terms to take and pay contract terms. It would negotiate with IPPs on any other terms, conditions and payments as the negotiation committee deems appropriate.

The subcommittee would also coordinate with the ministry of energy, National Electric Power Regulatory Authority, Central Power Purchasing Agency, National Transmission and Despatch Company, Power Holding Limited, Private Power Infrastructure Board, and Alternative Energy Development Board for any actions that may be required from these organisations towards achieving the objectives of the ToRs.

The body would document the understanding reached with various IPPs towards achieving the objectives of the ToRs and recommend IPPs, which should be considered either for retirement or for detailed forensic audit.