LAHORE: The eight independent power producers (IPPs), which invoked sovereign guarantees in March for the recovery of their Oct-Nov 2011 dues, have given the government another three days to clear their outstanding payment of Rs34 billion. The power producers warned the government on Monday that they would be forced to take a legal action against it if their dues were not cleared within 72 hours (or by Wednesday).

“We reserve the right to file a case against the government with a Pakistan court or with the international court or go for arbitration for violating its contractual obligations and defaulting on sovereign guarantee,” a senior executive of one of the IPPs told Dawn.

“We have already selected our team of lawyers who will advise us on how to proceed from now onwards for the recovery of our outstanding dues,” he added.

The IPPs claim that a case outside Pakistan against the sovereign default would immediately result in severe reaction from the global financial sector, resulting in the rejection by foreign banks of the country’s trade documents and downward revision of country rating.

The government in the meanwhile has released Rs45 million to each of the four IPPs producing electricity from oil. “The amount provided today to the plants run on oil was sufficient to operate them only at 40 per cent of their daily generation capacity. It means they produced only 300-320 megawatts of electricity on Monday after the government released the funds to them for fuel,” the executive said on condition of anonymity. “If it wants these plants to continue their operations on Tuesday, the government will have to provide them more cash for purchasing fuel.”

He said the remaining four gas-fuelled plants were getting gas for half the day. “They are not using oil because of cash crunch, which has cut their generation by almost half to 400-425 megawatts.”

He said the IPPs would produce electricity only and when the government provided them with cash for the purchase of oil. “No cash, no electricity. We do not have funds to purchase oil and provide electricity to the government for free. We are already on the verge of defaulting on our project loan payments.”

The government owes Rs69 billion, about Rs44 billion to oil-based plants and Rs25 billion to gas/oil based plants, to these IPPs for the electricity it has purchased from them since Oct last.