Lingering Energy Issues

The stage looks set for a new era for power and energy in Pakistan. Prime Minister Khaqan Abbasi on Saturday unveiled the groundbreaking of Punjab Power Plant to produce 1263 megawatt of electricity, and PESCO announced that 63% of the feeders in the country are load-shedding free; signifying important steps forward towards load-shedding free Pakistan.

However it seems the old habits of the past still haunt the Ministry of Energy now, as the government of Pakistan risks international embarrassment as well as energy crisis with its non-payment of overdue amounts to independent power producers. The Independent Power Producers Advisory Council (IPPAC) has urged the prime minister to resolve the serious financial crisis the independent power producers are facing on account of large due receivables from the National Transmission and Despatch Company (NTDC). The letter to the Prime Minister stipulated that the IPPs were now so financially insecure that they could not timely cater to their respective financial obligations to their lenders, operators, fuel suppliers and other third parties.

The government should respond immediately to this mostly low-key cry for help from IPPAC before things get worse and the IPPAC is reduced to appealing to international authorities. IPPAC has previously sought relief from the London Court of International Arbitration, which awarded more than Rs14 billion to IPPs in a dispute on overdue claims with the NTDC.

The government, under the sovereign guarantee, now has to pay due amount within 10 days from the date of submission of final notice. If it doesn’t pay up, the IPPs reserve the right to get sovereign guarantees converted under their PPAs, a move which will bring bad repute to the government, and could be disastrous for the economy, as it could disincentive many investors.

The electricity generation situation in Pakistan is looking on the up, but if these lingering issues are not resolved, it can spiral back into crisis mode very quickly. The government should remember the circular payment and debt issue, the numerous arbitration cases it lost against IPPs and the destabilising effect on the government this kind of situation had in the past. It must fix it post haste.

Where in 2013, a load-shedding free Pakistan seemed a distant dream, now the Prime Minister announced a Pakistan with surplus energy, where officials would be punished for theft of electricity. However, if we are to see this dream become a reality, the old ghosts of defaulting and corruption must also die with the power blackouts.

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