WEB DESK: According to a Business Recorder exclusive, the Private Power Infrastructure Board (PPIB) headed by the Minister for Water and Power Khwaja Asif in its 106th board meeting indicated that the federal government would not purchase power from imported coal-fired plants that have failed to achieve financial close as per the agreed schedule.
The rationale for this decision is rooted in sound economics: as power generation from imported coal would have to be paid for from our scarce foreign exchange reserves therefore a mechanism to cap such power to provide local more economical sources of power must be put in place – only a possibility in the event that the timing of the financial close was not met as otherwise the contract could be challenged in courts of law.
Punjab is currently engaged in processing imported coal-fired projects and its representatives are continuing to raise concerns about PPIB’s decision not to procure electricity from coal-fired projects that have failed to meet the scheduled financial close.
In other words, a conflict is brewing between Islamabad and Punjab and if past precedence is anything to go by there is a legitimate concern that Punjab government, through its considerable influence in the seat of power in the centre, may succeed in overturning PPIB’s decision. Be that as it may, we would urge the government of Punjab to take a more careful look at PPIB’s economic rationale prior to challenging its decision at the highest executive forum of the country.
Projects based on imported coal, in spite of our considerable domestic coal deposits at Thar – comprising around 175 billion tonnes that are deemed to be sufficient to meet the country’s fuel requirements for centuries – were deemed necessary as multilateral donors indicated that since our local lignite coal deposits would be environmentally more damaging than imported coal therefore they would not fund projects that rely on local coal.
Based on this fact alone to support imported coal projects over and above domestic reserves makes little economic sense as repayment of the loan would imply higher electricity changes. In this context, it is relevant for the provincial government to realise that the decision of the Federal Finance Minister Ishaq Dar to eliminate the circular energy debt on the second last day of 2013 fiscal year contributed substantially to each consumer paying 43 paisa per unit more as interest on acquired loans than would otherwise have been payable.
This higher rate no doubt compromises not only the kitchen budget of the common man but also raises input costs of our productive sectors making our products uncompetitive in the world markets.
Secondly, and equally importantly, the Punjab government must realise that Pakistan does not have the special coal carriers required to transport coal from the port to upcountry areas and neither do we have dedicated port jetties with the capacity to deal with minimising the impact of coal dust on those unloading the coal from the ship to the dock and then again from the dock to the carriers.
And finally because of the costs and environmental impact of transporting coal long distances countries that rely on coal as an input for electricity generation locate plants as close to the source of the coal as possible. To locate coal-fired plants in Punjab and envisage transporting coal over great distances be it from the port or from Thar is simply not economically viable nor for that matter is it viable from the health perspective of those involved. One can hope that better sense prevails and the Punjab government desists from this folly.
But private sector also must not over-invoice its imports. The Punjab government is establishing electricity projects at 40 percent of the cost demanded by private sector. This too is not fair. The way forward for the government is to stop issuing sovereign guarantees in relation to power projects.
We also need to auction private projects as we get closer to the demand and let the private sector compete. It would bring the tariff down to benefit consumers.
Source: Business Recorder