Corridor projects need greater transparency


WEB DESK: Federal government has guaranteed to pay the Chinese companies generating power, in case, the Discos are unable to pay them on time.

The Economic Co-ordination Committee of the Cabinet (ECC) approved the methodology for electricity generation projects being established under the China Pakistan Economic Corridor (CPEC) which are expected to generate 17,000MW.

A revolving account will be set up to cover 22 percent of the monthly billing to cover the difference between the amount billed and the recovery made by government-managed and -owned Discos. The Independent Power Producers (IPPs) generating 6000MW have been complaining that they are not being paid on time; they have invoked sovereign guarantees issued to them under the 2002 policy. The circular debt has once again swelled to Rs665 billion after being cleared in totality in June 2013, ie, Rs480 billion.

The reason being the inability of PML(N)-led government to reduce line losses to normal levels or recover billed amounts in totality. Thus there is a difference. Instead of providing 100 percent cover as given to IPPs – only 22 percent coverage is provided to the Chinese power generators.

Not only has Ministry of Water and Power claimed improvement on bill collection (recoveries), it has also achieved one percent reduction in line losses. But the Prime Minister appears to be dissatisfied with this improvement because he knows that his main opposition would be curtailment if not complete elimination of power shortages. And, this needs to be achieved prior to forthcoming elections. This is precisely the reason why he is so keen on achieving this goal.

He is already behind the curve ie, a shortfall between generation and demand for electricity. Not only does, therefore, generation capacity, transmission and distribution (delivery capabilities) need to be augmented. Private sector does not have the resources nor is it willing to do so in the short time-frame. The public sector, therefore, has to step in.

The government of Punjab-led by Shahbaz Sharif is putting up generation plants at a much lower cost. However, placing all of them on fast track can give rise to costly mistakes in design. Remember the Nandipur. Since there is little or no element of kickbacks – approvals are being given after clearance from government entities. That the organisations enjoying the support of army are being preferred in such deals is a fact that has found its best expression in the award of contracts to Nespak and the Frontier Works Organisation (FWO). But procurement rules do not brook such irregularities. The procurement law requires a two-stage tendering. And we need to remember that the transparency of process is more important than the profundity of pricing in a government procurement. Since these units are being financed by Chinese loans, PML(N) government appears to be confident that the establishment will back them. But these are loans which have to be paid back in hard convertible currency. Revenue stream of these power generation units will be in rupees. State Bank of Pakistan will have to provide dollars to repay these loans. In other words, our export industry would need to benefit from any boost in electricity generation and transmission. Therefore, one needs to dovetail the two laudable objectives – higher electricity delivery needs to match the enhancement in production or output of goods and services. Only will the surplus earn us dollars. Thus, it is a tricky situation. Good intentions alone would not suffice. More clarity is required which the opposition is also demanding.

Source: Business Recorder