Short-term solution: Govt to revive three rental power plants

The ECC waives off 5% custom duties on these RPPs, the move aimed at adding roughly 260 megawatts of electricity.

ISLAMABAD: The federal government on Saturday decided to revive three Rental Power Plants (RPPs) which had been shelved by the Pakistan Peoples Party (PPP) government and also imposed regulatory duties on import of steel products and mobile phones.

The Economic Coordination Committee (ECC) of the Cabinet approved the proposal for “utilisation of the existing available generation capacity-policy for short term independent power producers”, according to a handout issued by the Finance Ministry.

In a meeting chaired by Finance Minister Ishaq Dar, the ECC also gave its approval in principle of the North-South gas pipeline project under a government-to-government arrangement. China will provide loan for the project.

Further, the ECC waived off 5% custom duties on these RPPs. The move is aimed at adding roughly 260 megawatts of electricity to the grid through power generation using residual fuel oil. The government will purchase electricity from these RPPs for next three years.

The government maintained that the policy to revive the shelved RPPs was not in contravention to a Supreme Court (SC) of Pakistan judgment in the March 30, 2012 RPPs case, in which the apex court struck down the PPP’s RPP policy.

In order to avoid public criticism, the Pakistan Muslim League-Nawaz (PML-N) government has rebranded the RPPs as short-term Independent Power Producers (IPPs).

Interestingly, the author of the policy is the Water and Power Minister Khawaja Asif, who had filed a case against RPPs in the SC during the PPP tenure, alleging corruption.

The government has not officially disclosed the names of the RPPs which will be revived, but an official of the Water and Power Ministry said that they include the Gulf Power Plant with a capacity of 70MW, Reshma Power Plant with a capacity of 90MW and Techno Power Plant with a capacity of 100MW.

The government further said that the new arrangement with the RPPs will be based on the “take-and-pay” basis whereby there will be no obligation on the government of Pakistan for payment of capacity or any other charges.

Rs25 billion loan

The ECC also approved a move to accord sovereign guarantee for a syndicated term finance facility amounting to Rs25 billion for the power sector.

The loan will be utilised to retire circular debt of the IPPs and the government will recover interest of the loan from the honest electricity consumers through a 30 paisa per unit surcharge in the bills.

The tenure of the facility is set at five years with two years grace period. It will be syndicated term finance facility from a consortium of local commercial banks.

Regulatory duties

The government also imposed 15% regulatory duty on steel products, billets, bars and wire rods, 5% regulatory duty on cold rolled coils and galvanized platted sheets, and Rs200 per set duty on mobile phones.

The government will generate additional Rs2.5 billion on this account in the remainder period of the current financial year, said an official of the Federal Board of Revenue (FBR).

It was second time in less than a month when the government took the budgetary measures aimed at recovering shortfall in tax revenues. Earlier, it imposed additional 5% sales tax on all petroleum products.

The regulatory duties are aimed at giving a boost to the local industry and curb dumping, claimed the Finance Ministry.

Ministry added that the local manufacturers were demanding tariff protection and imposition of regulatory duty.

The levy of duty on Mobile phones similarly aims at discouraging the tendency of under invoicing, it further claimed.

LNG Pipeline

Although final cost occurring on the pipeline project has not been assessed yet, the rough estimates suggested that it will cost minimum $1.7 billion.

The project is capable of transporting one billion to two billion cubic feet gas from Karachi to mid country.

The pipeline will not only help transport imported LNG but also give transport capabilities for the Iran-Pakistan and TAPI gas pipeline projects which are expected to come on line in the next 3-5 years.

The Inter State Gas System (Pvt.) Ltd has been designated as the executing agency to implement the project under government to government arrangement.

The ECC also approved allocation of gas from Ayesha gas field to SSGC, which is the nearest transmission network. The ECC was informed that the county has POL products stock sufficient for 18 days of consumption.