Govt seeks 72 hours to address IPPs woes


After giving a considerate hearing to the Independent Power Producers Advisory Council (IPPAC) on Thursday, the ministerial committee on energy decided to form two sub-committees, which would be give recommendations to resolve circular debt and other issues of IPPs within next 72 hours. IPPAC Chairman Abdullah Yousaf said this while talking to reporters after the meeting.
He said the first committee would be headed by Minister for Water and Power Syed Naveed Qamar and will include Secretary Finance Waqar Masud. The committee will determine the size of circular debt and give recommendations for a possible solution. The other committee, he said, would include two industry representatives, Mian Muhammad Mansha and Nadeem Babar besides other officials that would be looking into the resolution of other issues affecting IPPs. He said both the committees would submit their reports within the next 72 hours. He said that after failing to make any recovery from the government the IPPs have given an ultimatum.
Inclusion of these IPPs in central banks Credit Information Bureau (CIB) could compound problems for the whole business groups as banks would treat them as defaulters. “The banks are already over exposed, as 30 percent of their advances are to the power sector,” Yousaf added.
An official source said the Ministry of Water and Power estimates receivables of the Pakistan Electric Power Company (PEPCO) to be Rs285 billion while the Ministry of Petroleum estimates receivables of its entities of over Rs290 billion. He said, the ministerial committee has helped focus attention on the issue and is moving towards a solution now. A statement issued by the Finance Ministry after the meeting said that the proceedings of the third meeting focused on the issues related to power generation especially the IPPs including affect of circular debt, outstanding payments and a sustainable way forward to devise a permanent solution to liquidity issues of the sector. The committee held a detailed discussion with the representatives of IPPs. IPPs presented their point of view on the issues affecting their smooth functioning. Two sub-committees were formed with a clear mandate. These sub-committees will develop proposals for the resolution of issues highlighted during the third meeting.
The Committee on Energy to date has reviewed the targets of estimated revenue and cost of power purchase for the current fiscal year (FY12). The budgeted amounts of subsidies for FY12 that have been developed after thorough analysis by Ministry of Water and Power aided by PEPCO and allied finance wings of distribution companies and in consultation between the Ministry of Water and Power and Ministry of Finance have been reviewed by the committee. Due to the dynamic nature of these numbers, due of various input costs like oil and gas prices, adjustments continue throughout the year to meet the targets set at the beginning of the year. The liquidity crunch in the system is a varying figure as it is affected by market prices of fuel, generation mix, price of electricity, line losses and collections. The committee is focusing on the effects of these figures on the dynamics of the power sector. The difference between payables and receivables is being continuously monitored and needs to be reduced to a sustainable level. Any weaknesses in the system and their overall effects are being analyzed by all stakeholders including PEPCO, NEPRA, IPPs and DISCOs on a continuous basis. NEPRA, as the regulator of the sector under a well developed and proven mechanism manages, regulates and monitors the entire sector to ensure sustainability and rights of the consumers. It takes into account all key issues of power sector, through an elaborate mechanism of tariff petition and public hearings. NEPRA while onboard in the entire discussion will also give a detailed presentation of the entire mechanism.