Iftikhar Ahmad Randhawa

Electricity deficit in the country is increasing day by day. Provinces have also started to attract the private sector investment like the Federal Government. Punjab province, being a major consumer of electricity, is worst affected. Protests of masses, shut off of industry, unemployment, deteriorated law and order situation are the aftereffects of load shedding.

Keeping in view this situation, Punjab also started its efforts to generate electricity in the province. Firstly it announced Punjab Power Generation Policy in 2006 and offered the entire canal falls for private sector investment to produce hydropower. This policy was amended in 2009 and capacity building of Punjab Power Development Board (PPDB) was done in 2010. This board provides a one window facility to the private investors. By 2012, PPDB had already started about 70 power projects with an accumulative capacity of 500MW above. More than twenty feasibility studies were completed, seven generation licenses were sought from NEPRA and tariff determination was also approved for certain projects. PPDB issued Letter of Support (LOS) to various projects but none of the projects could achieve financial closure why was that so?

The present government, soon after taking charge, started to accelerate pace with great enthusiasm and commit1nent. It allocated 10,000 acres land for solar power projects in Cholistan, this being a landmark “decision of the Punjab Government. All government land in the province has been offered on lease basis for solar power projects. Twelve coal-fired power projects of 660MW each have been offered to the investors for fast track installation after arranging suitable land in various parts of.the province. Punjab Government also wants to establish a single park for 5000MW coal-based power projects in the province. Local coal-based power projects are also going to be developed on mine mouth in addition to the projects mentioned above. Projects of biomass are also approaching the desired physical progress. A point of concern is that all these projects are compelled to sell the electricity to national grid as single buyer model is in practice in the country. Federal Government’s commitment to provide Sovereign Guarantee is applicable to all such projects feeding the national grid, To have Sovereign Guarantee, the sponsors would have to sign Power Purchase Agreement (PPA) with NTDC or DISCO and Implementation Agreement (IA) with Private Power Infrastructure Board (PPIB) or, Alternative Energy Development Board. PPIB and AEDB would sign IA only if they have issued Letter of Support (LOS) to the Project. In case of projects initiated by Punjab Government, LOS is issued by PPDB, After issuance of LOS, PPDB is to take up the matter with PPIB or AEDB for issuance of IA. Both these federal institutions are reluctant to issue IA to Punjab projects, PPlB is reluctant on the plea that PPDB should issue IA as per vires of Punjab Power Generation Policy 2009. Renewable Energy Policy does not allow AEDB to issue IA for the projects which have not been issued LOS by AEDB, PPIB or AEDB are not obliged to issue IA to the projects for ‘which they have not been issued LOS, In these circumstances, the question arises as to how the Sovereign Guarantee would be issued by Government of Pakistan to the projects initiated by provinces if the Federal Government’s institution does not issue Implementation Agreement-Legal Flaw in the Policies,

It is mentioned, in accordance with implementation agreement, that the Federal Government provides commitment & .of all the fiscal and financial incentives to the projects according to the po1ices in vogue. The responsibility of the provinces as mentioned in the IA is only to the extent providing land or security. Can a province commit federal incentives- absolutely not. Thus the IA isued by the provinces would not be acceptable to the sponsors lending agencies as it would be d6ficient of financial, and fiscal incentives promised by the Federal Government. So, in a nutshell, if the Sovereign Guarantee is not issued to the projects initiated by Punjab they would not be able to attain financial closure, Resultantly, Punjab would not be able to attract foreign investment -A problem.

For a deep and. thorough solution to this problem, we should have a look in the power sector of the country, Government of Pakistan announced its Federal Power Generation Policy in 2002.

This policy was applicable to hydro, coal, gas and renewable resources projects. In accordance with the policy, all provinces and the government of AJK were authorized to process projects up to 50MW capacity. Provinces were allowed to work in accordance with the federal policy or announce their own policy according to the scenario in the province (Policy Para-86). PPIB can only issue LoI and LoS to the projects above 50MW capacity (Policy Para-86). Punjab Power Generation Policy 2009 provides that IA would be signed between Government of Punjab and Sponsors (Policy Para- 27).

Federal Government also created AEDB in 2002, which announced its policy in 2006 titled “Policy for the Development of Renewable Energy for Power Generation. This policy provides incentives to the small hydro, wind and solar projects. Federal Policy has also targeted

generation of 9,700 MW from renewable resources up to 2030. This policy has not been extended to the projects of geo thermal, urban waste, fuel cells, animal dung or tidal waste. Net purchase is available for the projects having capacity above 1MW. In this case DISCO will purchase electricity on the average tariff of IPPs set by NEPRA and also, the producer will receive electricity from DISCO on the applicable tariff for its own use. Net metering is available for the projects of capacity up to 1MW and in this case, the sale or purchase tariff is same as the one approved by NEPRA in general tariff. Provinces have been allowed to facilitate off grid projects only. All the on grid projects are in the domain of AEDB.

Another shift in power sector was made with 18th amendment in the Constitution of the Islamic Republic of Pakistan whereby electricity was removed from the Concurrent List and placed in Part-II of Federal Legislative List, and CCT was authorized to formulate policies for electricity.

This shift has put embargo on the provinces to legislate upon “Electricity”. It is worth mentioning that Article’ 157 (1) of Constitution authorizes Federal Government to construct or cause to construct only hydro and thermal power plants whereas, as mentioned in article 157(2) of the’ constitution, provinces can construct every kind of project. This means that only provinces, and not the Federal Government, can construct the project of renewable energy and if Federal Government legislates on the issue, it would be legislated for the provinces. But Federal Government on 25.05,2010 promulgated AEDB Act allowing Board to process, facilitate, construct or cause to, construct renewable energy projects in the country. As PPIB was facilitating all types of projects above 50MW and projects less than 50MW were processed by provinces, CCI in 2010 also allowed provinces to construct or cause to construct the projects without any capping. However, it was clarified that Sovereign Guarantee will be available only to the projects supplying electricity to the national grid. Now after promulgation of AEDB Act, PPIB and AEDB with mutual arrangements have set their domains. PPIB now process all thermal projects and hydel projects greater than 50MW. AEDB process all renewable energy projects including hydel upto 50MW capacity. These institutes issue Letter of Intent (LoI), LOS and then sign IA for the projects of their set domain. The Sovereign Guarantees for thermal and greater than 50MW hydel projects is issued by PPIB and for all other projects, including all kinds of solar and wind projects, by AEDB. The institution that would issue LOS is entitled to sign IA and later on, issue Sovereign Guarantee for the project. In these circumstances, if PPDB issues LOS it has to sign IA and then surely also issue Sovereign Guarantee to the project and if AEDB issue LOS then AEDB signs IA and issue Sovereign Guarantee. But when Punjab issues LOS, it is to sign IA and then to issue Sovereign Guarantee, which it cannot. Same me be the hurdle for others provinces too.

Bearing this issue in mind, a meeting was held in July 2013 in the Ministry of Water and Power wherein it was decided that LOS to the provincial projects will be issued with the signatures of both Federal and Provincial institutions. AEDB and PPIB were also directed to prepare a standard draft for such, LOS. This draft has not been finalized even up till now. Resultantly, provincial projects are not moving ahead. Sponsors are now reluctant to get facilitation from the provinces.

It needs to be cleared that the standard draft of LOS can be issued only after amendments in the Federal or Punjab Policies and approval of the draft from ECC too. Punjab cannot amend its policy after 18th Amendment whereby Electricity is now Federal Subject. AEDB or PPIB can only amend their Policies through the approval of Economics Coordination Committee (ECC). Strictly speaking, standard LOS, as stated above, can also be issued after the approval of ECC with regard to policies as well as the draft.

Amendments in policies and approval of draft are not simple tasks. The red tape-ism of the official setup is a hurdle everywhere. Such other cases like approval of Alternate Energy Policy 2012 and approval of Electricity Act 2013 are in limbo since long. Same fate is expected of this case. We will waste months, even years, if we are not committed to the change in the setup. We have already wasted a year. These changes need to be tackled as quickly as possible.

This is possible only if Punjab CM takes lead of the task. Otherwise, this obstacle will cause the shut down of Punjab projects.