Payment issue: Ministry calls on power producers for resolution

IPPs say it is getting difficult to run plants in absence of cash flow.

LAHORE:

The Ministry of Water and Power has called a meeting with independent power producers (IPPs) on May 29 in an effort to address simmering resentment and prevent chaos over mounting inter-corporate debt in the energy chain.

Water and Power Minister Khawaja Mohammad Asif will chair the meeting. Not only this, the finance minister is also likely to meet representatives of the IPPs to take up payment issues and bring power outages under control, say sources.

“I believe we may not be paid this fiscal year, especially after agreements that the Ministry of Finance has signed with financial institutions,” said Abdullah Yousuf, Chairman of IPP Advisory Council, while talking to The Express Tribune.

“We cannot run this power production business for long, like the way we are operating now. We need cash flow to purchase oil and conduct regular operations,” Yousuf said. “Once we face liquidity crunch, the situation from our end may be different.”

The circular debt in the energy chain is increasing at a rapid pace. It stood at Rs298 billion at the start of May, of which Rs141 billion was to be paid by the government to the IPPs operating under the 1994 power policy and Rs59 billion to the IPPs running under the 2002 policy.

The IPPs have been pressing the government to clear the debt to ensure uninterrupted power supply in summer, but they say they have got no firm commitment from the water and power ministry so far.

With the summer reaching its peak, power shortfall is increasing in the country. Though the government has recently added 1,000 megawatts of electricity on the prime minister’s directives, still the demand-supply gap is widening towards 3,000MW, sparking fears of further outages in coming days.

A ministry source argued that the circular debt had just started to rise again, but had not reached dangerous levels as it was a year ago or in the previous government’s tenure when up to Rs3 billion was added every day to the debt. “The figure has now come down to Rs1 billion daily,” he added.

The IPPs have total power generation capacity of around 8,000MW and at present they are contributing 6,330MW out of country’s total production of 12,400MW.

Last week, the IPPs were producing around 5,000MW, but diversion of gas to some of the power plants on the prime minister’s directives pushed production higher.

Soon after coming to power in June last year, the government had cleared circular debt of Rs498 billion and announced a short, medium and long-term strategy to tackle the issue.

The strategy included measures aimed at improving recovery from power distribution companies, tackling inefficiency of these companies like preventing fuel theft, bringing new machinery and focusing on cheaper generation.

“Though the government is heading in the right direction, it will be some years before fruitful results of the power policy emerge,” the ministry source remarked.

Published in The Express Tribune, May 24^th, 2014.

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