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IPPs plan cut in generation amid rising circular debt

Updated May 08, 2014

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Independent power producers (IPPs) contributed 57 per cent of the total power generation during the last month.—File Photo
Independent power producers (IPPs) contributed 57 per cent of the total power generation during the last month.—File Photo

LAHORE: Private power producers plan to start cutting generation on the fresh build-up of their unpaid bills (known as inter-corporate circular debt of the power sector) to the tune of Rs298 billion ever since the government had liquidated the previous debt of Rs480bn at the end of the last fiscal year.

“The independent power producers (IPPs) contributed 57 per cent of the total power generation during the last month, generating an average of 6,168 megawatts in spite of the liquidity crunch facing them owing to a fresh pile-up of the debt,” a senior executive of an IPP set up under the 2002 policy told Dawn.

“But this cannot go on for ever. We will have to first cut our generation and later stop if our financial difficulties continued to persist due to non-payment of our bills,” he warned.

The average output of private power producers for the month of April is already nine per cent down from the four-month generation of 66pc attained by them between December 13 last year and April 14 this year.

The IPPs say the government owes Rs141bn to the IPPs established under the 1994 policy while the dues of the IPPs set up under the 2002 power policy are Rs59bn. The total outstanding bills of Gencos, Chashma Power and hydel are Rs98bn.

“The IPPs have responded positively to the government’s efforts of resolving the power crisis by increasing their generation capacity utilisation. But the government has done little to make this sustainable and durable,” the anonymous IPP executive said.

He said the dues of the 15 IPPs operating under the 2002 policy have crossed the level at which they had invoked sovereign guarantee of the state under the previous government. Asked as to why aren’t sovereign guarantees are invoked this time around, he replied: “We may shortly if the government did not respond positively to our pleas and pay us our dues.”

The IPPs operating under the 1994 power policy are supplied fuel by the state through either PSO or gas distribution companies. The same is the case with government sector power companies. The IPPs under the 2002 policy have to buy their own fuel to run their power plants but with the outstanding dues they are finding it hard to continue producing power.