Government may find it difficult to run the 425-megawatt Nandipur power plant as the National Electric Power Regulatory Authority (Nepra) has turned down its request to approve an increase of Rs23 billion in the cost of the project and recover it from consumers.
“The government has landed in trouble after the power regulator refused to approve the increase in project cost. The Ministry of Water and Power believes that in this situation it will be unfeasible to run the plant and it will go bankrupt,” an official said.
The ministry was of the view that the cost stood at Rs58 billion and in a review petition filed with Nepra for approval, the government put the cost even higher at Rs65 billion including the cost of laying liquefied natural gas transmission lines.
It sought approval for an increase of Rs4 per unit in the power generation tariff to Rs15.63 per unit.
In April 2015, the regulator had approved a cost of Rs42 billion for the Nandipur power plant and set the power tariff at Rs11.63 per unit.
Now, the regulator has turned down the plea for the increase in project cost and kept it at Rs42 billion, saving the consumers a burden of Rs23 billion.
It has approved the cost of engineering, procurement and construction at $109 million instead of $382 million. It has asked the government to adjust the higher cost in equity for the project.
The government has already faced scathing criticism and allegations of kickbacks in establishing the Nandipur power plant and different investigation agencies including the National Accountability Bureau (NAB) were probing the matter.
Auditor General of Pakistan also stepped in to conduct an audit. The controversy also led to the removal of Nandipur Power Company Managing Director Captain (Retired) Muhammad Mehmood.
The controversy had erupted last year when the Nandipur power plant was shut down due to a technical fault and tussle between the chief of the power company and the Ministry of Water and Power. The company managing director wanted to award maintenance and operation contract to a Malaysian company despite reservations of the board of directors.
In its audit findings, the Auditor General of Pakistan also raised questions over appointment of the managing director, lower-than-required capacity of furnace oil treatment plant and award of the project to a blacklisted foreign company.
The country also faced a loss of Rs12 billion because of the power plant’s shutdown for three months.
Published in The Express Tribune, January 30th, 2016.