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ISLAMABAD: Perturbed over policy shifts, the Azad Jammu and Kashmir government has sought the centre’s support for completion and materialisation of the 2,000MW hydropower projects and encourage private investment in the region.

The federal government announced recently that it would no more guarantee purchase of electricity from small renewable energy sources based on upfront tariff and would hold competitive bidding for inducting future power generation capacity.

The Khyber Pakhtunkhwa and Sindh provinces have already protested over the announcement even though the new policy is yet to be formally approved or old policy cancelled by any competent forum.

A senior government official told Dawn that AJK Prime Minister Raja Farooq Haider Khan had written a letter to Minister for Power Sardar Awais Ahmed Khan Leghari to take steps for removal of obstacles hampering completion of ongoing and future hydropower projects in the AJK region.

Mr Haider is reported to have offered every possible support for strengthening cooperation between the AJK and the federal government on different matters of mutual interest, particularly the development of hydropower projects.

He said the development of hydropower resources of the AJK was a priority sector and several projects having different installed capacities were under implementation across the AJK region, both in public and private sector which had played a vital role in harnessing the development of energy resources in the country.

The AJK prime minister said that hydropower projects of 232MW were currently in commercial operation through private investment while another 102MW Gulpur project was under construction and would soon assimilate into the national energy portfolio. In addition, two hydropower projects of 1,864 megawatts (Karot and Kohala) capacity were in the process of development under the China-Pakistan Economic Corridor (CPEC).

Mr Haider reminded the minister for power that the AJK and the provinces were allowed to process projects proposals of up to 50MW under provisions of Policy for Power Generation Projects 2002. Sovereign Guarantee of Government of Pakistan for these projects, however, was not available initially.

Hence, both investors and lenders were not comfortable in financing of these projects. This had been a major bottleneck in setting up of small scale hydropower projects in the AJK over the past couple of decades as a result of which not a single project (below 50MW) could be launched in the private sector.

He said that on repeated requests of the provinces and AJK, the Economic Coordination Committee (ECC) of the Federal Cabinet decided in September 2005 to provide Sovereign Guarantee for these projects subject to condition that power purchaser would be the federal entity and that the tariff would be approved by the National Electric Power Regulatory Authority (Nepra).

Despite this decision, the problems of the AJK remained un-resolved as it could not fulfil both the conditions (federal entity and Nepra) due to its special constitutional and administrative status. To settle this long-standing issue, a mechanism containing Facilitation Agreement with Tripartite Letter of Support (LOS) and performance guarantee was evolved in consultation with Private Power and Infrastructure Board (PPIB) of the Federal Ministry of Water and Power.

Under this arrangement, the PPIB was to lend a supporting hand, sign the implementation agreements, Letter of Supports (LOSs) and subsequently provide Sovereign Guarantee also as in case of projects of above 50 MW.

Even after adopting this analogy, the issue of power purchase agreement for small hydropower projects in the AJK could not be settled. The AJK Electricity Department, which could have been a probable power purchaser, was not in a position to purchase power produced by these projects for not being a federal entity.

Furthermore, Nepra does not have its jurisdiction in the AJK and, therefore, the implementation of these projects remained stalled. A way out was, however, found to settle this issue by holding a series of meetings at different levels and finally a settlement was reached.

Under the settlement finalised by the then federal minister for water and power on October 19, 2013, it was decided that the “Central Power Purchasing Agency (CPPA) of National Transmission and Dispatch Company shall execute power purchase agreements on behalf of distribution companies for up to 50MW projects in provinces and the AJK in similar way it was being done for above 50MW power projects”.

The AJK prime minister asked Mr Leghari to let the settlement materialise and facilitate development of hydropower projects of various capacities in the region.

Published in Dawn, January 16th, 2018