ISLAMABAD: Independent Power Producers (IPPs) have urged the government to lift restrictions on import of spare parts and machinery necessary for maintenance of their plants, imposed by the State Bank of Pakistan (SBP) due to foreign exchange issues, to ensure availability of plants for the System Operator, sources close to Managing Director PPIB told Business Recorder.
The private power plants concerns have been conveyed by Independent Power Producers Advisory Council (IPPAC) in a letter to Managing Director PPIB.
On May 20, 2022, SBP through its EPD Circular Letter No. 09 of 2022, instructed banks (i.e., authorized dealers) to seek prior permission from SBP’s Foreign Exchange Operations Department (FEOD) before initiating transactions for import of machinery and parts for 25 specific HS Codes under customer tariff which, unfortunately, also pertain to power generating machinery.
Later, in continuation of the circular, on July 05, 2022, SBP vide its EPD circular 11 of 2022, expanded the scope of restricted items by including all HS Codes falling under Chapter 84 and 85 of customs tariff wherein again SBP advised banks to seek prior approval from its Foreign Exchange Operations Department for initiating import transactions against items mentioned in the circular.
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The letter states that with grave concern, majority of the IPPs spare parts requirement are covered under chapter 84 and 85 of the customs tariff and these chapters have been included in the list of the annexed circular.
According to IPPAC, the Implementation Agreements of IPPs signed with Government of Pakistan ensures timely availability of the required foreign exchange for the requirement of the company. Regular import of spare parts is required for periodic and breakdown maintenance of plant and machinery to ensure availability to the System Operator.
The entire contractual framework of IPPs is set up in reliance on the commitments by the GoP and an expectation that it will be met in a timely and just manner in accordance with the terms of the relevant agreements in good faith. However, due to this newly imposed restriction of prior approval of SBP, IPPs are unable to open L/C’s and initiate other import transactions since July 2022 and requests for initiating import transactions have not been approved by SBP till now.
In result of restrictions, the maintenances of plants are getting due one after another and if the IPPs are not granted approval by SBP on most urgent basis, IPPs will not be in a position to keep their plants fully available and operational which will result in shortfall of generation for the National Grid and result in wide spread power outages. “It is well known fact that neither technical limits nor the prudent utility practices allow the IPPs to delay regular maintenances and major overhauls because such delays have serious consequences to performance of engines and may also make the machinery breakdown insurance void,” said IPPAC.
The Association has requested MD PPIB to take up the matter with SBP on most urgent basis and strongly requested them to either waive off the prior approval restrictions for IPPs or devise express approval mechanism for initiating import transactions e.g. opening of L/Cs, and imports under open account and documentary collection etc. as this issue is going to hamper IPPs availability unless immediate measures are not taken.
M/s Rousch Power has also written a similar letter to the government seeking help for import of control system.
Copyright Business Recorder, 2022
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