In a bid to formulate a policy for attracting private sector investment in transmission lines, the ministry had constituted a committee under the chairmanship of water and power division secretary. PHOTO: FILE
ISLAMABAD:
The Pakistan Muslim League-Nawaz (PML-N) government has dubbed the independent power plants (IPPs) set up during the Pakistan Peoples Party (PPP) government a disaster for the economy and has decided not to follow the model in awarding contracts to private investors for laying transmission lines.
Under the 1994 power policy, the PPP government had promised 18% rate of return to the IPPs, which was fiercely opposed by the PML-N at that time. Now, when the party is in power, it has again slammed the policy, which was echoed in a meeting of the Economic Coordination Committee (ECC) on May 16.
According to sources, the ECC – the apex economic decision-making body – suggested that the proposed 18% rate of return on equity for power transmission line projects should not be part of the draft policy, which had been prepared while keeping in view the IPPs’ model that proved to be a disaster for the country’s economy.
The ECC directed the Ministry of Water and Power to revise the draft policy in consultation with key stakeholders including the Law, Justice and Human Rights Division.
“The government will not offer a guaranteed rate of return on investment in the proposed project,” the ECC said.
Committee members reviewed the policy’s summary, prepared by the water and power ministry in an effort to attract private sector investment in laying transmission lines, and directed the ministry to come up with a fresh summary in consultation with the stakeholders within two weeks.
The members said the government had planned large-scale capacity addition to the country’s power production in the next few years and that would necessitate an extension in the transmission network.
They pointed out that planned power generation projects with a combined capacity of 6,600 megawatts at the Gadani Power Park would also require transmission lines to be laid from Gadani to the load centre in the country’s north.
Owing to the encouraging response of the private sector and constraints on public sector resources, it was considered necessary to invite the private sector to pump investment into new transmission lines, the water and power ministry stressed.
It told the ECC that in a bid to formulate a policy for attracting private sector investment in transmission lines, the ministry had constituted a committee under the chairmanship of water and power division secretary. It included members from the federal government institutions, provinces and the private sector.
After detailed deliberations, the committee finalised the recommendations and drafted a policy framework for the private sector transmission line projects. The policy was based on the build, own, operate and transfer (BOOT) model and the National Transmission and Dispatch Company would provide the legal right of way.
Apart from this, the National Electric Power Regulatory Authority (Nepra) would announce upfront tariff.
Published in The Express Tribune, May 29th, 2014.
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COMMENTS (13)
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The very existence of wadera corruption party is a non stop disaster for this country
But they are happy to pay through the nose for the Eurobond and borrow 2bn instead of 500m as planned? To prop up the rupee because the finance mnister has made it an issue of his honour? What is going on in this country? No game plan, no strategy. Things will unravel within a year.
@antanu:
43 % electricity in the world are generated through coal....recently, Russia & China signed MOU to produce world`s largest coal fired power plant on Russian side from where it will be transmitted to China....
I said this in 1994
@Mirza: Coal fired plants are not BBQ units Mr. Mirza. They have proper waste disposal mechanisms along with filtration of exhaust gases. Most of the carbon produced from ashes goes in manufacturing of various dyes and inks for example. Secondly 2000MW nuclear reactors are being built in Karahi. I think Nawaz government in genral has done better jobs atleast initiating these projects. Cant say they would stick with the timelines.
@Mirza: in countries like US...INDIA...CHINA...coal is the major source for electricity generation. .These countries are not facing any problems so your reservation against it in Pakistan is beyond comprehension.
@Zaheer: It is not the issue of "if IPPs were not there". It is an issue of bad business decision. If IPPs were not there, there would not have been vacuum. Why coal, solar or hydel based policy was not formulated and sold to the investors in 1994?
@Faizan: The government (NEPRA) will have the buy the electricity at the rate based on ROE specified. Therefore, no matter how cheap electricity hydel or coal IPPs produce, the benefit would not be passed onto the consumers.
Moreover, just imagine the situation if IPPs producing more than 6500 MWH of electricity were not there?
Lastly, government is offering more than 25% return on coal based IPPs? Why so high?
Coal is the worst form of fuel to produce electricity. Nothing is more polluting and worse for the country and the environment. Are we ever going to use our much touted nuclear know-how for the benefit of poor masses or keep making the bombs?
@just_someone: Because hydel and coal produce cheap electricity, while IPP is the most expensive source of electricity
A very good start. Sounds reasonable. I look forward to more details. Well done all.
how is this any different than the 20+% ROE being given on the hydel, coal and other projects being built? how is a high ROE there OK and not OK here???!!!