IPPs extend credit period

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LAHORE - The Independent Power Producers (IPPs) have agreed to extend credit period from 30 to 60 days after due process, besides withdrawing cases against government in Supreme Court and pledged additional power supply of around 1700MW during Ramazan. 

Finance ministry sources said that the new government now has to pay an additional Rs45.63 billion on account of bank interest due to non-payment of the dues to IPPs by the previous government during last couple of years.

They said that the PPP coalition government not only failed to settle financial issues and energy crisis in the country but it damaged investors’ confidence badly through dishonoring its own sovereign guarantees besides producing expensive power by using less efficient plants and delaying payments unnecessarily.

Treating it as a priority and imperative for turning around the economy, the PML-N govt decided to restore the strategic value of “sovereign guarantee” which was called every month and was dishonoured every month too in the last regime due to its careless attitude towards power sector.

The govt right after taking over the charge had announced clearing long outstanding dues of IPPs and other entities within 60 days to improve power generation to shorten the gap between demand and supply of energy to non-residential and residential consumers. On 28th of this month, the govt finally cleared the dues of approximately Rs316 billion.

Though vested interest still tried to put it off the track by raising various issues like non-payment of capacity invoices, etc. on the basis of non availability of plants as a consequential default of the NTDC’s non-payment which led to an almost deadlock between govt and IPPs but better sense prevailed and the Finance Minister had to put his foot down and decide that whatever relief is available to IPPs due to the court order should remain available till the validity of the said court order.

The poor performance of the previous government affected badly the country’s economy having potential to develop through various sectors but its ill-planning and lethargic attitude towards solving power crisis hit the industrial and commercial activities hardly in the country and brought down the growth rate significantly.

Duarte Ricardo, an international research analyst in his recent report titled “Pakistan’s Economic Growth Continues To Disappoint” writes that the fiscal year 2012-13 was the fifth consecutive year where GDP growth missed the official target of 4.3 percent. In fact, according to provisional figures, the GDP expanded only 3.6 percent, an insufficient rate to absorb the country’s rising population. Moreover, industrial production has been growing below potential due to constant shortages of energy.

As per sources, by not following the economic order (cheaper energy first) during 2012 alone the national exchequer lost some Rs 25 billion, as fuel guzzling plants were put to task due to inefficient planning and easier way of getting fuel to them on credit, while the fuel efficient plants were kept closed as providing them with cash against their invoices enabling them to purchase fuel was a bit cumbersome job.

The non-seriousness of the previous government left the IPPs with no option than to invoke the sovereign guarantee. The disregard of this guarantee has caused dent to financial credibility of the state and the investors who were seeing Pakistan as potential market to capitalize their money in the power sector stayed away from investing in Pakistan.

Besides, many of the companies related to power sector and different other sectors were reluctant to set up their business in the country where not only the energy crisis has been prevailing for long but the government does not respect rules of engagements and terms of business.

Independent Power Producers and the National Transmission & Despatch Company Limited (NTDC) (power purchaser) have recently signed a Memorandum of Understanding (MoU) to resolve disputes and facilitate government to better manage the cash flow positions. IPPs including Liberty Power Tech, Hubco Norowal Project, Nishat Chunian Power, Nishat Power, Sapphire, Atlas Power, Saif Power and Halmore have signed the MoU.

Courtesy:  Nation

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