ISLAMABAD: While the government has been running inefficient power plants based on expensive diesel oil, in some cases at Rs42 per unit, to reduce loadshedding, consumers are reported to have suffered a colossal Rs18 billion loss owing to closure of much cheaper plants.

According to sources, the 120 megawatts Japan Power and 110MW Southern Electric plants at Raiwind have been closed for more than 22 months and no action has been taken to restart them. The projects can generate 230MW at Rs14.8 per unit.

In contrast, the government has been running its own generation companies’ plants and also diesel-fired independent power projects like Orient, Saif, Sapphire and Halmore at a tariff of Rs20 per unit and above because of unavailability of gas.

The government even went to the extent of generating about 95MW from the much talked about Nandipur project at Rs42 per unit.

As part of talks for amicable resolution of contractual disputes, the sponsors of the two IPPs at Raiwind are even reported to have offered to come into production on a “take and pay” basis, just like rent, but in vain.

In this case, the public sector was required to take responsibility for fuel supply because the two plants had run out of their credit limits to arrange fuel.

The talks were held with Secretary for Water and Power Nargis Sethi and former secretary Saifullah Chattha besides all the relevant officials of the National Transmission and Dispatch Company.

The generation company and some IPPs having 25 per cent plant efficiency could generate the same amount of electricity at Rs100 million against Japan and Southern Power’s 40pec efficiency at Rs25m.

The two plants had been producing electricity on advance payments from the government under a memorandum of understanding signed in 2006 until the practice was suspended in September 2012. The MoU was signed given the fact that both the IPPs ran short of funds because of circular debt and their original power purchase agreements did not provide for advance payments.

Now they cannot procure funds from the banking sector on their own because of weak finances, an official told Dawn. “There are wheels within wheels,” he said when asked why the public sector was reluctant to purchase cheaper power and that too without any liability. He said the government was ready to facilitate but required some important approvals.

The NTDC is facing a cost of Rs825m per month because of expensive purchases.

The officials agreed that much expensive generation company plants as well as diesel IPPs were being used by the NTDC, resulting in bleeding of national wealth, but said legal issues remained to be ironed out.

The two plants are located on the main load centre and can substantially mitigate loadshedding in Punjab, particularly in Lahore. They can also bring down the monthly fuel adjustment surcharge being sought from the National Electric Power Regulatory Authority by the distribution companies.

The two plants could be up and running with just Rs2bn provided the government took a decision, an official said. The amount is nothing as compared to the Rs480bn settlement of circular debt since the PML-N government came to power.

The plants were closed down because of minor contractual disputes.

Published in Dawn, August 12th, 2014