ISLAMABAD: With circular debt estimated to go beyond Rs2.7 trillion by end of current fiscal year, Energy Minister Omar Ayub Khan on Monday said the government would announce full details of the savings in power generation cost through ongoing review of energy contracts in about three weeks.
He said the government would also unveil in three weeks time a detailed reform plan for the power sector including the expected reduction in cost of generation through revised agreements with power producers, improvement in transmission and distribution system.
At a hurriedly called news conference, the minister declined to take questions saying all the details would be shared with the media and the people after three weeks as working and assessments were in progress. He said no previous government ever tried to review power sector problems to resolve them.
Special Assistant to the Prime Minister on Power, Shahzad Qasim, who was present on the occasion said the tariff renegotiation commission led by Babar Yaqoob Feteh Muhammad had signed memorandums of understanding with about 90 per cent IPPs under 1994, 2002 and 2006 policies. However, the commission had not yet submitted the report to the government to work out savings secured through them.
According to him, those savings would be run through the tariff structure to determine the final impact that would then go through the regulator’s approval process. He said the government would have to ensure outstanding payments to the IPPs to actualise the revised understandings.
Khan said the present government took up the matter with IPPs in a very cooperative environment and thanked their sponsors for achieving a win-win situation in the larger national interest by accepting the government’s demands in the light of its difficulties.
He said the previous governments they never tried to address weaknesses. Khan said most of the agreements with IPPs under 1994, 2002 and wind power plants of 2006 had been reviewed and its detailed computations and savings would be made available in three weeks as part of the overall reform plan along with similar revisions in the power projects owned by the government.
The minister said his government inherited complicated challenges in the power sector from the previous administrations which weren’t serious in resolving burning issues. For example, about Rs44 billion worth of subsidised power was being supplied to Balochistan tubewells every year while the province’s total development programme was about Rs80bn.
This meant much of the amount could have been spent on the development for the people. He said a comprehensive plan for this correction was also being made part of the reform strategy to be announced shortly.
He claimed the plan would address the flow in circular debt that had gone beyond Rs2.2 trillion. Also, the government would show performance in sectors of economy to improve transmission and distribution system to ensure competitive tariffs to the industry and agriculture to help them stand on their own feet.
Khan said the prime minister had been holding back increase in power rates while keeping in mind the expected savings from power plants.
Published in Dawn, August 18th, 2020