ISLAMABAD: Two important federal institutions have objected to the government’s move of granting concessions for revival of some rental power plants (RPPs) under a revised name – short-term independent power producers (IPPs).

The Economic Coordination Committee (ECC) of the cabinet has allowed the revival of some RPPs, proposed by the water and power ministry, to generate electricity at gas fields on an interim gas supply basis.

In a letter written to the National Electric Power Regulatory Authority (Nepra) on Nov 11, the Federal Board of Revenue has opposed the utilisation of the machinery of a couple of rental power plants at zero tax, saying the relevant statutory regulatory order (SRO) of 2006, which allowed duty and tax-free import of machinery and plant for three years, required re-export of the machinery after 36 months, but this did not happen.

Reshma Power and Gulf Power also fall in this category.

In view thereof, the letter stated, “the power generation machinery and equipment imported by M/S Reshma Power Generation (Pvt) cannot be allowed for the purpose of IPP since they are required to be re-exported as per mandatory condition of the said SRO”.

The National Transmission and Despatch Company (NTDC), an important stakeholder in the case because it has to purchase electricity, also reported to Nepra that the Reshma power plant was a second-hand open-cycle machine and was not very efficient.

It said the capacity of some of the existing IPPs with higher efficiency was being underutilised because of high cost of imported residual fuel oil and circular debt.

The NTDC said the temporarily imported power generation equipment had been exempted from customs duty on the understanding that it would be re-exported and the importer would submit indemnity bond equal to the amount of duty payable to ensure its re-export. It said temporary import was for 36 months subject to a condition that this would not be disposed of in Pakistan or used for any purpose other than for which it was imported.

The NTDC also said that the existing import policy should not allow the company to utilise the temporarily imported machinery and equipment for any other purpose other than for use as temporary rental power plant.

It said the company had not deposited the indemnity bond to the generation company concerned, adding that the company’s previous liabilities from Wapda and the customs clearance department should be settled.

In the matter of grant of generation licence to Reshma Power and Gulf Power, the Nepra has asked the sponsors of two RPPs to secure no-objection certificate from the FBR, NTDC and the National Accountability Bureau (NAB) to ensure grant of generation licence.

NAB CLEARANCE: Informed sources said NAB had cleared the two projects, although it was required to examine original requirements of the RPPs import policy and the revised policy which it had overlooked.

Water and Power Minister Khwaja Asif said electricity from RPPs would be purchased only after its clearance by NAB and that they would not be paid capacity charges. The government will purchase electricity only in line with merit order and pay the energy charge after approval by Nepra.

But he said that even if there was some procedural issue, the matter would be taken up again with the ECC for a decision.

The ECC has allowed the revival of controversial RPPs of the PPP government under the short-term IPPs with improved terms and conditions to partially bridge electricity shortfall provided it did not violate the Supreme Court’s 2012 judgment.

An official said the sponsors of three RPPs – 90MW Reshma Power, 100MW Techno Power and 70MW Gulf Power – had already reached an understanding with the government for their revival.

Published in Dawn, November 26th, 2014