Islamabad:
With criticism of independent power producers (IPPs) mounting, Prime Minister Shehbaz Sharif has formed a task force to engage international companies to review agreements with IPPs and propose measures to reduce capacity payments.
Currently, electricity consumers pay over Rs 2.2 trillion in capacity charges even to those IPPs which are closed and do not generate a single unit of electricity.
It is surprising to note that the cost of power is Rs 9 per unit which the consumers pay in the power generating facilities, while in the non power generating facilities, they pay Rs 18 per unit due to capacity charges.
In other words, closed factories are rewarded even though they produce absolutely nothing. Of the total cost of electricity generation, consumers pay 70% in capacity charges.
Sources told The Express Tribune that the task force will review and recommend measures to reduce capacity payments, including but not limited to shutting down certain factories and taking other necessary measures as deemed appropriate.
It will review issues related to the cost of setting up PPEs and identify bad practices, procedural weaknesses and regulatory gaps, if any, with a view to recommending future correction of these issues.
The committee will assess the compliance of the PPPs with the parameters, terms and conditions of the agreements signed with the relevant government agencies and institutions and will propose measures to resolve the issue of circular debt in the energy sector.
IPPs have come under fire in recent weeks for exorbitant capacity charges running into trillions of rupees.
Late last week, leaders of the All Pakistan Textile Mills Association (Aptma) Central and Southern Zones presented a map of requirements for the smooth functioning of the industry.
Addressing media persons at a press conference, Aptma’s central vice-president Naveed Ahmed urged the government to reduce the rate to 6-7% from 19.5%, provide electricity at 8-9 cents per kilowatt-hour (kWh) instead of for 14 cents and remove all undue taxes on imports, exports and profits to enable industry to properly operate its factories.
Aptma Southern Zone President Zahid Mazhar and other leaders pointed out that textile export industries of Sindh and Balochistan are facing serious problems due to inconsistent supply of natural gas and electricity.
They described the expensive energy as unacceptable and destructive as it caused the closure of industrial units.
The task force set up by the Prime Minister is mandated to implement structural reforms in the energy sector. It will identify structural reforms to reduce the financial burden on the electricity sector borne by the federal government and enable the creation of an efficient, liquid, self-sustaining and competitive energy market.
The task force includes Federal Minister for Power Awais Ahmad Khan Leghari (Chairman), Special Assistant to the Prime Minister on Power Hammad Ali (Co-Chairman), National Coordinator Lt. Gen. Muhammad Zafar Iqbal, Syed Zakaria Ali Shah of the Secretariat Team (BS- 21 ) (Member), National Electricity Regulatory Authority Nominee (Member), Central Energy Market Authority Nominee (Member), Private Energy and Infrastructure Board Nominee (Member) and Securities and Exchange Commission of Pakistan Nominee (Member).
The working group may select any expert from the public and private sector and seek input and information and/or assistance from local and international consulting firms, bankers, legal advisers, chartered accountants or any other organization or individual as deemed necessary.
Among the commission’s terms of reference is to recommend measures to make the electricity sector financially and operationally sustainable and to oversee the development of an efficient and liquid energy market plan along with its implementation.
It will propose the utilization of excess production capacity by industries and Special Economic Zones (SEZs).
The task force’s role will not be limited to fact-finding and will also be responsible for overseeing the implementation of its recommendations.
It will receive full support and the required budget allocation from the federal government.
Within one month of its formation, the task force will submit recommendations along with an implementation plan for consideration by the prime minister.
The Power Directorate will inform the working group, which will be supported by the special secretary, who will head the committee’s secretariat.
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