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ISLAMABAD: Power Division is yet to establish Head of Accounts for payment of 40 per cent of total agreed amount to the Independent Power Producers (IPPs) of the Power Policy 2002, well informed sources told Business Recorder.

Power Division is expected to release the first installment of Rs 52.4 billion by the end of current month.

“We have to get cleared the Head of Accounts which is necessary to make payments to the IPPs of 2002,” the sources added.

The sources said official process to pay 40 per cent of agreed amount as first installment had to commence after the minutes of Federal Cabinet are received at the Power Division.

Federal Cabinet approved Rs52.4 billion as first installment of 11 IPPs of Power Policy 2002 on Sep 28, 2021. These revised contracts have already been approved by ECC, CCoE and Federal Cabinet during the second week of February 21 after a lot of deliberations and efforts.

Payments to IPPs: PD may submit report in upcoming meeting of CCoE

On payment of first installation of outstanding undisputed payables to IPPs as per revised contracts, revised terms will be effective and the government will save billions of rupees every year especially in increasing rate of dollar and savings from operation and maintenance cost plus reduced interest rate.

Industry sources say, due to late payment, the process of arbitration proceedings through Arbitration Panel is also slow regarding past excess payments of approximately Rs 56 billion, and decision will be binding for both the parties without going into further appeal in foreign /local court channels.

Moreover, heat rate test will also be conducted after payment to check actual efficiency of these plants which may further reduce the tariff.

In the light of the decision of Cabinet to go for negotiation instead of forensic audit, over 4000MW reduced tariff has already been implemented since June 2021 after payment to 20 x IPPs.

On payment of first instalment to 2002 Power Policy IPPs, reduced tariff of these IPPs around over 2000 MW will also be applicable. These revised contracts have projected savings to approximately Rs.836 billion for remaining terms of these IPPs.

The sources said that payment of wind IPPs of around 600MW is already approved; however, a few IPPs final signature are awaited due to foreign lenders approval.

The government is saving billions of rupees from reduced tariffs of IPPs established under pre-1994 policy and 1994 policy.

Copyright Business Recorder, 2021

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