ISLAMABAD: The government of Sindh has rejected ‘a low upfront tariff’ for wind power projects announced recently by the National Electric Power Regulatory Authority (Nepra) and asked the centre why plants using all other fuels, except natural gas, to generate power have upfront tariff.

Sindh is the country’s largest gas producer which contributes about 4.2 billion cubic feet per day to national gas supplies and is home to one of the largest wind corridors. Therefore, it feels that low upfront tariffs for wind power projects and non-existent tariff for gas-based plants was a discouraging factor for private investors.

In a hard-hitting letter, Sindh’s Minister for Finance Murad Ali Shah criticised Water and Power Minister Khawaja Mohammad Asif for describing issues concerning public welfare as frivolous and irrelevant. “I am not surprised by your choice of words. This callous attitude towards the people is the current federal government’s forte as has been proven time and again,” Mr Shah said in the letter.

He said upfront tariffs had been announced for all fuels, except gas-based power plants, and asked the federal government to instruct Nepra to announce upfront tariff also for gas-based plants.

The contents of a series of letters written by Mr Shah to the federal government also suggest that senior bureaucrats at the federal ministries are not keen to discuss the matter with the provincial government to resolve the issue. In one of these letters the Sindh finance minister said: “Several efforts have been made to contact officials of the ministry of water and power to resolve these issues but so far no positive response has been received.”

In a reference to the federal power minister, he said, “you consider yourself magnanimous while serving the people of a province of this great nation, speaks volumes about your spirit to serve, or lack thereof.”

Amid criticism from investors, Nepra last week cut levellised upfront tariff for wind power projects by 20pc to Rs10.6048 per unit from Rs13.1998. (Mr Shah in his letter put the previous wind tariff at 13.52 cents per unit).

The Sindh minister said the investors had rejected the revised tariff because it was too low and added that it was “an indication to discourage investment in wind sector and the government of Sindh would not accept such a low tariff as vital energy source of Sindh will be wasted by such actions”. He asked the federal minister to intervene in the matter.

He said the Sindh government could add 1000MW of electricity by the end of 2016 through indigenous projects in wind, small hydel, solar and gas- based plants and specifically requested gas tariff and letters of interest for Dadu and Naudero gas-based plants, but complained that there had been no progress on them.

Sindh and centre have been at odds over the issue of over Rs60bn power sector receivables. The centre accuses the province of being a defaulter, even after reconciliation.

The provincial government says it had formed special teams for reconciliation as decided at a meeting with the federal government, but power companies were not deputing their officials for bill verification.

The revised tariff for wind plants came last week after protests by the Sindh government over a ban imposed by the federal government on new wind and solar projects. The centre said the temporary ban was meant to translate falling technology prices of wind energy in the international market into domestic tariff.

The revised tariff announced by Nepra was immediately rejected by the wind energy investors who said the energy policy was heavily tilting towards Punjab-based solar power projects, about 1000MW of which had been awarded to a single firm through a negotiated deal, instead of bidding.

The regulator said the wind power tariff had decreased over time because of advancement in technology and would of help to the economy and industry due to its benefits and competitiveness.

“It is a shocking tariff,” said a wind energy investor last week. He said 1,000MW solar projects in Punjab had been given higher tariff despite its 17pc plant efficiency compared to wind energy’s 38.5pc.

On top of that, a power agreement would be finalised only on the basis of yet to be completed grid study by the National Transmission and Dispatch Company. This means the wind project would not apply for tariff with Nepra before the grid report, being a pre-requisite.

Published in Dawn, July 6th, 2015

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