Govt working to pick up IPPs’ liabilities instead of paying them

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The government is working on picking up Rs 150 billion bank liabilities of the independent power producers (IPPs), whose outstanding dues have crossed Rs 266 billion during the first half of the current fiscal year, by arranging funds from local banks before December 31. An official source said the government was negotiating with banks to pick up liabilities of the IPPs instead of making payments of their outstanding dues before the close of the calendar year. The IPPs had to make payments to banks for their loans before the end of the year. Their outstanding dues against electricity sold to the state-owned entities were Rs 121 billion in May this year, which increased to over Rs 266 billion by the end of December.
The government has no money to pay the IPPs as the receivables of the defunct Pakistan Electric Power Company (PEPCO) are estimated to be over Rs 310 billion. The government will not be making any payments to IPPs, it will be simply picking up their liabilities, the source said, adding that the banks were likely to agree as the government had already settled the Rs 294 billion circular debt issue with them.
Investors of IPPs have warned the government that they would be forced to shut down their plants if their liabilities were not cleared before December 31. It would also create problems for the government plans to attract investment to add 3,000MW to the national grid during the next three years. IPPs are also operating on low capacity because of nonpayment of their dues.
The government has also failed to arrange Rs 10 billion for maintaining uninterrupted power supply during the canal closure period from December 26 to January 31. The Water and Power Ministry had sought the amount on emergency basis to maintain fuel oil supply during the low hydroelectric generation period. The load shedding in cities has already increased to 4 to 6 hours and up to 10 hours in villages every day because of the start of the canal closure process.
The source said the government had not released Rs 10 billion to the NTDC. It was stressing collection of fuel price adjustment (FPA) dues to overcome the financial crisis. However it was informed that the distribution companies had managed to collect only Rs 5 billion out of Rs 22 billion under the FPA for the months of June and July.
The ministry estimates a blockade of Rs 71 billion under FPA because of court stay orders. The failure to pass an increase of 2 percent in the power tariff was also resulting in a burden of Rs 2 billion per month. The government had planed an increase of 14 percent in the power tariff during the current fiscal year, having already increased it by a whopping 75 percent during the last two financial years.