IPPs were the main beneficiaries of the circular debt resolution by this government. But then why has power production not picked up after that relief? The answer lies in what the funds were for: the governments attempt cleared only the arrears. For the production to increase significantly, current payments have to be fulfilled-timely and completely.
At such times when there is no significant rise in electricity output, the governments decision to operate rental power plants (RPPs) under the new name--Short-Term IPPs (STIPPs)--can be seen as a shot in the arm. Though the sad fate of the controversial RPPs is raising qualms about this new regime, a look at what these STIPPs are all about could help one form an informed opinion.
It must be iterated that power generation equipment imported under the RPP scheme was declared illegal by the Supreme Court of Pakistan on August 30, 2012. And now, after nearly two years, the government has decided to utilise the equipment and machinery as a temporary stopper in the power shortfall.
Industry experts seem all perky about the new venture, and their argument carries weight. Back then, it was the process of acquiring the machinery that was declared illegal by the Supreme Court. So, using the idle equipment that has already been paid for is not such a bad idea.
Apart from a new name, the main difference between RPPs and STIPPs lies in the terms set by the government for the latter. Previously, under the RPP regime, the government was bound to pay a fixed rental whether the machinery was used and operative or not. Now it has agreed on zero advance payments and fixed rental-known as the capacity charge-under the new programme, where power production from STIPPs will be based on take-and-pay policy.
Also, STIPPs are not just all the 19 RPPs. Only those RPPs which will get clearance from the NAB will become short-term IPPs. Other salient features of the STIPPs include the option to sell electricity to bulk consumers like industrial parks and housing societies without government guarantees and obligation to buy all of the generated electricity.
So far, three RPPs with a cumulative installed capacity of 260 megawatt have been identified for the new venture, all of which will be furnace oil-based. Industry insiders are of the view that the tariff structure of these short-term IPPs will be comparable the IPPs currently running on furnace oil since there is no capacity charge or rental. However, the selection of RPPs has attracted political criticism by the opposition where it is being portrayed as a pick-and-choose approach.
Amid such unknowns, logic and common sense suggest making use of existing generation capacity before acquiring new. Call it rebranding or a new launch, STIPPs are being introduced as an immediate solution for the blackouts looming ahead. The question now is: What will it achieve? After all, for a brand to reborn, it really needs to be more than just a new name.
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