ISLAMABAD: A day after transferring its administrative control to the power ministry, the government on Tuesday directed the National Electric Power Regulatory Authority (Nepra) to grant all those tax breaks to investments in transmission lines that are available to power generation projects.
The decision was taken at a meeting of the Economic Coordination Committee (ECC) of the Cabinet presided over by Finance Minister Ishaq Dar. The ECC also allowed the Ministry of Water and Power to go ahead with the award of $2.1 billion contract for laying the Matiari-Lahore 878-kilometre transmission line to a Chinese firm subject to the tariff already determined by Nepra.
“The ECC considered and approved policy directives to Nepra to make the Policy Framework for Private Sector Transmission Line Projects 2015 consistent with the existing practice of tariff determination for the purpose of clarity,” according to an announcement by the Ministry of Finance.
It said the ECC also authorised the Ministry of Water and Power and the Private Power and Infrastructure Board (PPIB) to process the 660kV high-voltage-direct-current (HVDC) Matiari-Lahore transmission line project to State Grid Corporation of China (SGCC)/China Electric Power Equipment and Technology (CET).
A senior government official told Dawn the power ministry will take the project to the Joint Coordination Council (JCC) of the China-Pakistan Economic Corridor (CPEC) meeting in Beijing by the end of this month for approval. He said the JCC will convince the Chinese company to accept the tariff approved by Nepra.
Last month, Nepra allowed 74 paisa per unit tariff for the $2.1bn project upon the government’s request by revising its previous rate of 71 paisa.
That was despite the fact that the Chinese firm was demanding 95 paisa per unit rate. The project is being developed without competitive bidding because it was a government-to-government deal as part of CPEC.
However, to facilitate the contractors, Nepra allowed higher payloads in the first 10 years on at least three components and on one element for the entire 25-year life of the project. The transmission line is central to the transfer of more than 4,000MW of electricity from under-construction power plants in Thar, Hub and Port Qasim to Punjab’s major load centres.
The major relief in the tariff was given in the insurance cost, debt-servicing, return on equity and return on equity during construction.
The original tariff approved by Nepra for the first 10 years ranged between 85-87 paisa per unit. This has now been revised to 90-92 paisa per unit. The previous tariff for 11-25 years stood at 37 paisa per unit, which has now been increased to 39 paisa.
The project will take 36-42 months to be developed, although power generation from plants of Thar, Hub and Port Qasim will start pouring in much earlier. Because of the government-to-government arrangement, the power ministry and PPIB will not hold the project’s financial and technical evaluation.
Published in Dawn, December 21st, 2016