ISLAMABAD, Jan 11: The National Electric Power Regulatory Authority (Nepra) on Friday offered a 30-year indicative tariff of 7.8 cents per unit for a 1000MW coal-based power project in Thar on prime minister’s instructions. But, it was immediately rejected by the Sindh government.

A meeting presided over by caretaker Minister for Water and Power Tariq Hameed, therefore, could not reach an agreement on presenting the offer to the Economic Coordination Committee (ECC) as desired by Prime Minister Mohammedmian Soomro about two weeks ago, sources told Dawn. The meeting was convened to finalise a summary for the ECC.

Representatives of the Sindh government had proposed an upfront tariff of 11 cents per unit but said a tariff less than 10.5 cents per unit would be ‘unacceptable’.

They took a strong position against the indicative tariff determined by Nepra and accused the federal government and its agencies of sabotaging investment prospects in their province, the sources said.

They said at the meeting that the government had shied away from the Chinese Shenhua group who had offered a tariff of 5.79 cents per unit for a difference of a few pennies some years ago that had left the Thar coal reserves undeveloped and it should not repeat the same mistake.

They also insisted that Indonesian coal prices minus transportation cost should be assumed as benchmark to determine an upfront tariff, which should be allowed to the sponsors of the 1000MW coal project.

Sources in Nepra and power ministry said sponsors of the project had themselves offered a tariff of 9.5 cents per unit a couple of weeks ago but the provincial government was now asking for a much higher tariff of 11 cents that did not meet any international standard or the national laws.

They said some powerful groups in the Sindh government were unnecessarily making the matter a provincial issue that could be settled on prudent economic principles, and added that the heating value of the Thar coal was much inferior to Indonesian coal.

The sources said Nepra had been asked by the prime minister to come up with an upfront tariff although Nepra Act or relevant rules and tariff standards did not allow such an upfront tariff.

They said the rules required that a tariff should be reached through a consultative process involving public hearings on the basis of economic factors and bankable feasibility study.

However, Nepra agreed to provide an indicative tariff of no legal binding based on international experience in the absence of a bankable feasibility study for promoting investment in the province.

This carried a condition that the final tariff would be worked out on the basis of bankable feasibility study to be conducted by the same project sponsor for which a letter of interest had already been issued.

The sources said the total cost of the project had been estimated at $2.5 billion, including $1.9 billion for coal mining -- a cost unheard of in the contemporary world.

Sources said Nepra had offered 7.8 cents per unit tariff by ‘overstretching’ its mandate on the back of the prime minister’s instructions; otherwise fair and prudent cost was not more than seven cents per unit.

A source in the Sindh government claimed Nepra had offered a tariff of about 14 cents per unit for two power projects being sponsored by AES of the US and Mitsui of Japan on imported coal.

Federal government sources, however, denied having made such an offer and claimed the two companies were still in the feasibility stage and no tariff had been offered so far for projects based on imported coal.

Independent sources said the Sindh government and investors working at Thar were building up a case around the argument that since thermal projects were coming up at a tariff of 14-15 cents per unit that involved imported fuel costing foreign exchange, anything below that rate for domestic resources should be acceptable to the government.