Mechanism for determining hydel projects’ tariff to be reviewed

MUSHTAQ GHUMMAN

ISLAMABAD: The federal government has decided to review the mechanism for determining hydel projects’ tariff and modifying upfront tariff procedure to make it financially acceptable to market players.

This was decided in the meeting of the Senate’s Standing Committee on Water and Power meeting on Wednesday, which was held under the chairmanship of Zahid Khan.

The committee was briefed on financing for construction of Diamer-Bhasha and Dasu dams and Patan and Malakand III projects by foreign agencies.

Officials of the National Electric Power Regulatory Authority (Nepra) gave a presentation on procedure for determining tariff for new power projects and reasons for the delay in evaluation of tariff by the regulator as well finalising of upfront tariff of various projects.

Representatives of Private Power Infrastructure Board (PPIB) and Nepra differed regarding determination of tariff for various technology projects.

PPIB’s Acting Managing Director NA Zuberi argued that upfront tariff given by the regulator to different projects was not market-driven because of which investors did not show an interest despite getting tariff approval.

On the other hand Nepra’s member, tariff, argued that the regulator determined tariff on the basis of documentation provided by investors and after getting the tariff approved, most of them did not return.

In reply to a question, Khwaja Naeem, Member, Nepra, said that the authority had already slashed the time for projects’ tariff determination petitions from 6 to 4 months, aimed at expediting the projects.

Committee members expressed annoyance over the performance of both the PPIB and Nepra and directed that both organisations should sit together and resolve this issue within 20 days and report to the Senate secretariat. Heads of both the organisations agreed to review upfront tariff and projects’ tariff determination mechanism within the time limit given by the Standing Committee.  

Secretary Water and Power Zafar Mahmood proposed that Nepra should also determine upfront tariff for solar and wind technologies.

Committee members and the Secretary for Water and Power stressed that all organisations should give higher priority to hydel projects, as hydel was Pakistan’s future.

Briefing on financing arrangements for different projects, the representative of Economic Affairs Division (EAD) said that talks with Japan, Asian Development Bank (ADB) Islamic Development Bank (IDB) and USAID were underway to get funding for $12 billion Diamer-Bhasha dam.

The representative of Wapda said that Bhasha was its top priority, but Bhahsa and Dasu should be treated as separate projects.

According to him, Japan had agreed to extend $4 billion loan in procuring machinery and equipment, but not for civil works, for which different options, including leverage of machinery was being considered. 

USAID and IDB had committed $200 million and $100 million, respectively, for this project, but Pakistan needed a consortium.

“We have asked the Ministry of Foreign Affairs to convene a meeting of Friends of Democratic Pakistan (FoDP) to form a consortium for this purpose as any single agency or country cannot construct this mega project, but no response has been received so far,” he added. 

Chairman of the Standing Committee criticised the Minister for Foreign Affairs for the delay, saying if she could not give time in this regard then what “is the purpose of her appointment”. He stated that Japan had also expressed willingness to extend financing to enhance the capacity of Mangla reservoir.

Replying to a question, the Acting Chairman, Wapda, said that the World Bank had committed just $500 million for the Dasu project, but the bank was willing to finance the project in phases once engineering design and tender documents are completed. However, after this process WB would give $1 billion as first installment. 

Senators Zahid Khan, Humayun Khan Mandokehl and Nisar Muhammad expressed reservations over deliberate delay in hydropower projects.    

Committee members criticised the Managing Director of the Sarhad Hydel Development Organisation ( Sydo) for not operating Malakand-III hydropower project at full capacity.

The MD, however, clarified that the project was being operated by the irrigation department and admitted that the reduction in generation was because of silt.

The Committee warned the MD for not responding to its questions seriously and decided to summon the provincial secretaries for irrigation and energy in the next meeting to sort out the issue.