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May 7, 2021

IPP payments

 
May 7, 2021

The Economic Coordination Committee (ECC) of the cabinet has done well by approving payment of Rs90 billion to 35 independent power producers (IPPs). But this is not the whole story. The ECC has also asked K-Electric to ink an agreement for additional power intake from the national grid on timely payments. The ECC has also apparently given a ‘last chance’ to KE for settling Rs212 billion payments. Minister for Finance and Revenue Shaukat Tareen has been taking a keen interest in settling these issues, but any wrong move will jeopardize the power sector in the country. Another important decision of the ECC is to approve lowering taxes on Chinese investors of hydropower projects in Azad Jammu and Kashmir (AJK). According to reports, the National Transmission and Despatch Company (NTDC) has been supplying additional power to KE since April 2020 but KE has not made payment for the additional supply to the power division. Now as much as Rs212 billion is payable by KE to the NTDC which operates the national grid. The proposed supply of an additional 1350MW from the national grid to KE was supposed to address prolonged power outages in Karachi.

If KE and the NTDC are not able to resolve this matter amicably, then the citizens of Karachi will suffer in the impending summer months. In addition, an amount of over Rs400 billion is payable to IPPs and now the approved payment of first instalment to 35 IPPs out of the total 47 and withholding of payment to the remaining 12 IPPs that came under the Power Policy of 2002 appears to be discriminatory. A major hurdle in the payment of these 12 IPPs is the role played by NAB, which has launched investigations against them. It is noteworthy that the government signed identical agreements with the IPPs while revising the terms of their power purchasing agreements. The 47 IPPs set up from 1990 to 2013 deserve a level playing field.

To further delay the payments of unpaid bills to some IPPs will aggravate the matter. The government had agreed to pay them their unpaid bills in installments. Associating payments to IPPs with the conclusion of NAB inquiries may take many years. Is the government planning to delay the payments for years to come? In all likelihood, this rigmarole will result in more suffering for the consumers in summer months. NAB’s interference in such matters is unsavoury, especially if there are international parties involved. We have seen in the past that injudicious involvement and decisions by the judiciary landed Pakistan in hot waters, with huge penalties imposed on us. This is a serious matter and must be dealt with sagacity.