Overpayment to IPPs adds to circular debt

Committee deliberates issues of high tariff, capacity charges and heat rates

ISLAMABAD: The sub-committee of the Senate Standing Committee on Power met on Tuesday to discuss issues of high tariff, capacity charges, heat rates and calculation of payback periods of independent power producers (IPPs).

It gave a detailed analysis of how overpayments to the IPPs contributed to the circular debt of the power sector and led private businesses to flourish while damaging the national exchequer mainly due to poorly designed agreements.

The meeting, chaired by Senator Nauman Wazir Khattak, was attended by other senators and officials of the National Electric Power Regulatory Authority (Nepra).

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The committee took strong notice of the absence of power minister and secretary and observed that the issue under discussion was very important and related to the circular debt and economic challenges, and ideally the minister should have been present to respond to the sub-committee’s queries.

According to the research conducted by the committee, major IPPs have enjoyed alarmingly high ratios of profit over the last few years, mainly because of giving returns on profit instead of giving returns on investment. The committee noted that the state was overpaying these units and that could not be done without mala fide intention of Nepra, which seemed to be protecting the IPPs. 

Published in The Express Tribune, July 10^th, 2019.

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