Row over Thar power tariff: $5 trillion indigenous resource project
By Khaleeq Kiani
ISLAMABAD, Dec 17: Caretaker Prime Minister Mohammadmian Soomro is pushing for an expeditious decision on upfront tariff for the Thar coal-based power projects, but his adviser on energy is opposing such a mechanism, terming it ‘impracticable’, Dawn has learnt.
The development and exploitation of $5 trillion indigenous resource in Sindh has raised political stakes to such an extent that the prime minister has taken a public position for announcing an upfront tariff within days, but his adviser Mukhtar Ahmad says that international competitive bidding is the only way forward.
Mr Soomro has the support of Sindh chief minister Justice (retd) Abdul Qadir Halepoto and former minister for mines Irfanullah Marwat and the Federation of Pakistan Chambers of Commerce and Industry, and also of President Pervez Musharraf.
On the other hand, adviser on energy Mr Ahmad, who is expected to relinquish his post early next month, believes that the National Electric Power Regulatory Authority (Nepra) -- an independent regulator -- would “not be in a position to determine the ‘upfront’ power tariff”.
At the heart of dispute is a 1,000 MW integrated power project at Thar being sponsored by Hassan Associates of Farooq Hassan at an estimated cost of $2.2 billion. Mr Farooq Hassan, who was instrumental in setting up the Uch power project under the 1994 policy and who later became one of the major shareholders in the Karachi Electric Supply Company, has offered the government an average tariff of about 10 cents for the Thar project.
Sources close to the adviser said the Sindh authorities were presenting an emergency-like situation to get a tariff of their choice without any consideration for economic principles. They said there was no point in having domestic energy when it did not offer any saving compared with imported energy.
They also said that short-term thermal projects and their costly tariff could not be accepted as a benchmark for long-term energy supplies from domestic sources.
Those supporting the upfront tariff said the competitive bidding envisaged under the 2002 power policy did not yield any results and not a single project could be lined up for development.
On December 12, an Economic Co-ordination Committee (ECC) meeting presided over by the caretaker prime minister considered the request of a committee headed by secretary water and power Ismail Qureshi that suggested ‘separate indicative upfront tariff’ for different coal fields like Thar, Lakhra, Badin and Sonda and fixed coal price of imported Indonesian coal at Karachi minus freight charges as a benchmark coal price for determination of upfront tariff.
The ECC, however, directed Nepra to come up with upfront tariff in 10-15 days due to opposition from some of the participants.
On December 13, Mr Ahmad who is expected to join Asian Development Bank on January 5, 2008 said that credible capital cost and operating cost estimates were essential for tariff determination -- which at present is not available particularly for coal mining segment of integrated the coal mining and power generation facilities.
He proposed to have a reference tariff, instead of upfront tariff, on the basis of opportunity cost and that too if it was lower than 12 cents per kilowatt-hour of the furnace oil-based thermal projects. “With the reference tariff thus established (based on information available with Nepra and PPIB), a competitive bidding process could be implemented for each location (Badin, Thar etc)”.
On December 15, Mr Soomro reiterated at a business convention in Karachi that the issue of upfront tariff had been referred to Nepra without “loss of much time” which “should signal the beginning of gainful exploitation of the coal”.
A day later, Sindh caretaker chief minister wrote a strongly worded letter to Mr Soomro and complained that agencies at the federal level were not “forthcoming in providing conditions for development in this sector”.
