IPPs pocketed more than Rs 100 billion

Aftab Ahmed

The inquiry committee has suggested the government recover Rs 100 billion immediately from mighty power producers–IPPs.

The committee found that the power plants had recovered their investment in around two years after installing plants under power policy 2002.

The Inquiry committee headed by former chairman Securities Exchange Commission of Pakistan (SECP) has recommended reviewing the agreements signed with power producers to rescue the consumers from the multi-billion rupees capacity charges.

https://newztodays.com/hefty-profitsinquiry-commission-initiates-probe-against-ipps/

At present, the volume of capacity payment had touched the Rs 900 billion marks that would rise to Rs 1,500 billion by 2025. These payments are being paid to those idle power plants for not generating electricity.

The power plants set up under power policy 2002 were given undue favor which resulted in multi-billion rupees loss to the national exchequer and overburdened the power consumers with higher electricity bills.

A nine-member committee submitted a detailed inquiry report to Prime Minister Imran Khan which revealed more than Rs 100 billion losses by power producers.

The cost of the installation of power plants by independent power producers (IPPs), and under the government to government (G to G) agreements, power tariff, corruption in their fuel consumption, violation of merit order, guaranteed profit in the dollar, and certain conditions of power purchase, etc are the major reasons behind heavy losses to the national exchequer.

They said the inquiry committee has submitted an inquiry report titled ‘Committee for power sector audit, circular audit reservation, and future road map.’ The inquiry committee has scrutinized the documents pertaining to the cost and tariff of more than 60 power plants and submitted an inquiry report without any single note of dissent as all members of this committee have submitted their signature on the report”, said sources.

Prime Minister Imran Khan had formed a nine-member committee headed by former chairman Securities and Exchange Commission of Pakistan (SECP) on August 7, 2019. The inquiry committee included the offices of eight organizations including Inter-Services Intelligence (ISI), Federal Investigation Agency (FIA), and SECP as members.

The owners of IPPs had earned 50 percent to 70 percent profit annually. They said that the inquiry committee has recommended ending the capacity payment-based mechanism of “Take or Pay” with owners of power plants.

According to the informed sources, owners of power plants had shown the extra cost of their power plants and got approved extra tariff while NEPRA and all other organizations concerned did not verify the cost through independent ways.

They said that the owners of power plants had got approved heavy tariffs from NEPRA by showing Rs 2 billion to Rs 15 billion extra costs of the plants as Rs 30 billion extra costs of a coal power plant were shown in the record. The cost of the power plant was accepted by the authorities concerned which were prepared by the companies, said sources quoting findings of the report.

It is also learnt from sources that the inquiry committee’s report has transpired that owners of power plants have been earning unjust profit by using less fuel in power generation while NEPRA has never conducted an efficiency audit (fuel consumption audit) of the power plants as the influential owner of power plants have never permitted to conduct such audit by using different tactics.

Likewise, the power sector’s circular debt has crossed Rs 1800 billion due to wrong agreements, while owners of power plants have been earning 50 percent to 70 percent profit and there is no example of earning such a high ratio of profit on installing a power plant around the globe.

Moreover, though the guaranteed profit should not be for more than four to five years, the government and NEPRA has granted guaranteed profit for 25 years, while it is largely believed that owners of power plants extract their investment within one or two years due to high-profit ratio and wrong submission of cost of power plants. Large numbers of power plants have been installed by offshore companies, the sources said.

Quoting findings of the inquiry report, the sources further said that the committee has recommended a forensic audit of the cost of power plants installed after 2002 and verification of the cost of the same technology power plants which were installed in various countries of the world.