LAHORE  - With a view to ease power crisis, the federal government has decided to clear dues of private power producers by paying off roughly Rs300 billion on the 28th of this month, it was learnt.

“While payments to Gencos (public sector credit) will be made by August this year, the dues of IPPs till May 31st of the current year will be cleared through this initiative which will add 1700-2000MW in the national grid,” said a source in the finance division. Also, the source added, this will restore the lost value of sovereign guarantee that was invoked by a number of IPPs in the previous government over non-payment of huge over-dues. “Since the sovereign guarantee of the government is to get restored, it will attract new investment in the power sector to help reduce energy crisis in the long run,” they reasoned.

The IPPs said that this is very positive move of the new government, realizing that dealing with energy crisis should be a top priority. “The previous government had completely failed to solve this issue and it is believed to be the key reason why the PPP could not win required majority in the general elections this time,” they added.

The first thing regarding dealing with power crisis this government is doing is taking concrete measures on technical and financial grounds for the relief of both the industry and masses. This clearance of dues of IPPs is to plausibly reduce load shedding. “It was a long overdue concrete step toward solving the issue of circular debt and will increase IPPs production reducing load shedding which is adversely impacting the economic growth,” said Taha Javed Khan, Head of Research at Taurus Securities,

“This step will restore investors’ confidence in the power sector and attract more investment which will ultimately benefit the economy in the long run by minimizing the load shedding hours and generate employment opportunities,” he added.

The official further said that previous governments never paid any heed on using this option. “At the same time they did not use full capacity of these IPPs but of Gencos, thus inflicted a huge loss on account of efficiency and eating up more fuel to generate as much power as IPPs would have produced in less fuel,” he added. The next step for the government should be to ensure maximum recovery of charges against the billings to the customers to prevent energy sector from further financial losses. The non-payment of dues can be contained easily through tightening the recovery system.