ISLAMABAD – Payables of the Pakistan Electric Power Company (PEPCO) to Independent Power Producers (IPPs) and generation companies (GENCOs) have crossed Rs 288 billion. Inexplicably, 63 percent of the dues or Rs 182 billion are payable only to the IPPs.
A statement, issued by Independent Power Producer Advisory Council (IPPAC) on Friday, said that non payments to IPPs had reduced generation and, thereby, triggered power crisis. They stressed that the government should disburse payables in an equitable and transparent manner. In a letter addressed to the Water and Power Secretary Javed Iqbal, the IPPAC Chairman Abdullah Yousaf noted with regret that disbursement mechanism was non transparent, while discriminatory approach was leading to resentment among the IPPs.
He warned that desperate producers might approach the highest legal forum if inequitable treatment of IPPs was not stopped. He stated that the staggering amount of payables, which had already reached a saturation point, could result in curtailment of production if rectifying measures were not immediately taken. This would have catastrophic impacts on the economy.
The letter stressed on ensuring adequate electricity supply, for which, it was essential that the government disburses overdue amounts to the industry in a transparent manner. Resolution of the circular debt is necessary, as it will ease supply constraints and would help bring IPPs into full operation. It recommended clearance of outstanding dues, i.e. Rs 70 billion and Rs 52 billion respectively, to Hub Power Company (HUBCO) and Kot Addu Power Company (KAPCO).
Their payables are 68 percent of total over dues of IPPs, whereas their dependable capacity is 2586MW. Other IPPs possess a dependable capacity of 4700MW, while their receivables amount to Rs 60 billion. The letter recommended issuance of either bonds, TFC or Sukuk worth Rs 150 billion, to clear outstanding dues of KAPCO, HUBCO and PEPCO. It proposed that cash payment should be made to other IPPs – that have a lower share of circular debt.
According to the proposed criteria for payment of overdue amounts, payables to oil based plants and gas based plants should be cleared within 45 and 60 days respectively. PEPCO’s current installed capacity is 19,445MW, out of which currently dependable capacity is almost 13500 MW. There is a shortfall of around 4000 MW. Since power generation from major hydro power stations is operating at only 33 percent of the total capacity, the power sector is dependent on thermal power generation from IPPs and GENCOs.
