ISLAMABAD, Sept 20: The federal government decided on Tuesday to offer an enhanced tariff of 4.7 cents per unit to about 12 hydel power projects in the private sector instead of 3.1 cents signed by some of them.
Sources said that a meeting of the Private Power and Infrastructure Board (PPIB) decided to seek a formal approval from the Economic Coordination Committee (ECC) of the cabinet to this effect.
The sources said that Wapda Chairman Tariq Hamid, fearing public criticism, had refused to reopen at his own the agreed tariffs and increase it to 4.7 cents per unit but agreed that he would have no objection if the ECC took the decision.
Presided over by Minister for Water and Power Liaquat Ali Jatoi, the meeting was informed that a permission by the cabinet committee on investment (CCOI), few years ago, to former Wapda chairman Zulfiqar Ali Khan to reduce tariff for the projects had resulted in shying away sponsors of at least 12 projects.
The sources said that the 1995 Power Policy had offered a tariff for hydel projects at 4.7 cents per unit. However, the CCOI had allowed the former Wapda chairman to bring down the tariff through negotiations with investors. As a result, two of the investor groups had signed agreements to set up power projects at a levellized tariff of 3.1 cents per unit, but later failed to achieve financial close because major lenders — Asian Development Bank and Islamic Development Bank — found the tariffs economically unviable.
In the meanwhile, the other investors put off their investment plans saying they could not reduce their tariffs.
“The PPIB has decided to recommend to the ECC, the restoration of the tariff which was announced by the government under 1995 Hydel Policy,” an official statement said.
The decision would bring a change by implementation of the first ever private sector hydel project in the country and 84-MW New Bong Escape Hydropower Project would be able to achieve financial closing and start construction after approval by the ECC, it said.
In addition, the decision would accelerate the implementation of four power projects with the total capacity of 900-MW and estimated investment of $1.1 billion, the statement said.
The sources said that the government would soon approach foreign sponsors of four hydel power projects of total generation capacity of 1010-MW and a total estimated investment of about $2 billion to return with their investment at 4.7 cents per unit.
Majority of those independent power producers (IPPs) had given up their investment plans following Wapda’s refusal to increase the tariff for hydel projects.
The projects include 740-MW Kohala Power Project, 84-MW Matiltan Hydropower Project, 86-MW Rajdhani Hydropower project and New Bong Power project.
Official sources said that due to such a low benchmark tariff, the government and the Wapda failed to develop even a single hydropower project in the private sector during the last 15 years but kept on promoting costly thermal projects.
The sources said that President Gen Pervez Musharraf had expressed concern last month and reprimanded Wapda and the power ministry officials for shying away foreign investors in the hydel sector that he himself had been persuading from all over the world to invest in Pakistan.
