Power dues: IPPs delay legal proceedings against government

Govt asks for time to hold ECC meeting to resolve the issue.

LAHORE: Independent power producers (IPPs) have held off legal proceedings against the government for failure to pay the dues and will wait for an Economic Coordination Committee (ECC) meeting which will take up the issue.

The move came just a few hours before the expiry of deadline on Thursday when the government approached the IPPs, asking them to stop legal proceedings and give time for holding an ECC meeting to resolve the issue.

“The IPPs advisory council has accepted the government’s request and will not proceed further before the ECC meeting which will be held on May 15,” said Abdullah Yousuf, Chairman of the council while talking to The Express Tribune.

The government will present the case of delayed payments to IPPs for power supply in the ECC meeting in light of the recommendations made by an ECC sub-committee.

The government is evolving a mechanism to ensure regular debt payments to avoid default in future. In addition, modalities for daily payments will be worked out in consultation with the stakeholders for a sustainable payment stream.

The hectic measures on the part of the government came because of fears of sovereign default on payments to IPPs and increased load-shedding due to a drop in power production by the IPPs.

Earlier, in a letter sent to IPPs on April 26, the CFO of National Transmission and Dispatch Company (NTDC) sought time to finalise the matter of outstanding payments. The IPPs had served notices of default on the government on March 19, April 3 and April 10. Later on May 7, they sent a legal notice to the government.

“We are operating at 50% of capacity with the help of those payments which we are receiving on a daily basis,” Yousuf said.

“We are not sure what will be decided in the meeting, but one thing is certain that with current system of payments, it will be hard for us to provide maximum electricity. There is a need to develop a proper procedure for payments to IPPs to prevent this issue from arising in future,” he said.

The government has consistently defaulted on payments to IPPs. Total receivables of IPPs have soared to an alarming Rs232 billion. “Nine IPPs require Rs50 billion immediately to continue operations. We are looking to receive at least this amount as early as possible,” Yousuf said.

“We are on hold for a week, if the government pays our dues, then it will be fine. Otherwise, we will resume legal proceedings,” he said.

Published in The Express Tribune, May 11^th, 2012.