In a major policy shift, the Pakistan Muslim League-Nawaz government has decided to count on rental power plants (RPPs) for fast track power generation and bring three RPPs – whose contracts were cancelled by the Supreme Court – on the national grid.
The decision was taken by the Economic Coordination Committee (ECC) of the Cabinet on Thursday, finance ministry officials told The Express Tribune. The panel ordered companies which were awarded RPP contracts previously to apply for new generation licenses and seek new tariff rates from National Power Regulatory Authority (Nepra), they said. These RPPs are Gulf power plant, Reshma power plant and Techno power plant.
According to the officials, the decision has been taken to minimise the gap between demand and supply in the coming summer season – a reason the Pakistan Peoples Party government also used to justify the expensive RPPs. While in opposition, the PML-N had criticised the RPP policy of the PPP government.
A common feature shared by these power plants is their heavy fuel requirement due to the use of old and obsolete machinery, an energy sector expert said. The cost will be borne by consumers under the existing power policy that ensures minimum 17% rate of return as entire input cost is passed on to them, he added.
In what appears to be an attempt to deflect criticism, the government has rebranded these RPPs as ‘short-term independent power producers’.
The ECC has decided that the owners of these power plants will seek no objection certificates from the National Accountability Bureau. The panel also decided that the use of the RPPs will be subject to the whether it was not in violation of the top court judgment which declared their contracts illegal.
“In order to avoid obsolescence of such plants and machinery, and to avoid monetary claims under arbitration, these plants and machinery can be utilised to add 200MW of generation,” an official handout issued by the finance ministry read.
The ECC decided that the new tariff of these RPPs will be based on a ‘take and pay’ basis. The draft power purchase agreement of these RPPs will be presented again to the ECC for approval.
According to the Asian Development Bank (ADB) report that helped the nation understand the adverse impact of the RPP policy, the previous government guaranteed a 26% rate of return to Gulf power plant, 45% to Reshma and 21% to Techno. The PPP government had paid 7-14% advances to these three RPPs.
ECC clears payments to PIA
The ECC on Thursday approved $29.9 million payments to Pakistan International Airlines for the acquisition of eight aircraft on dry lease. The A-320S aircraft have been offered by Qatar Aviation Lease Company and will be available next month.
The highest economic decision making body also allowed the export of 250,000 metric tons of sugar by sugar mills from its surplus stock. The finance minister directed the Ministry of Industries and Production to ensure outstanding payments to sugarcane growers by sugar mills in coordination with the provinces.
The body also allowed import of 125,000 metric tons of urea fertilizer for the incoming Kharif (April to September) season in order to meet the demand as recommended by the Ministry of National Food Security. It directed concerned authorities to ensure the retail price of urea was maintained at Rs1,786 per bag. The ECC also considered the summary of the Ministry of Commerce regarding the lifting of the ban on gold import. It directed the ministry to resubmit the summary, incorporating guidelines provided by ECC, in the third week of April for consideration.
Published in The Express Tribune, March 28th, 2014.