ISLAMABAD: Independent Power Producers (IPPs) have sought amendment to State Bank of Pakistan (SBP) Circular of December 27, 2022 for treating their imports as essential items to avert generation shortfall despite available installed capacity.
Independent Power Producers Advisory Council (IPPAC) in a letter to Secretary Power, copies of which have been sent to Chairman Nepra, CEO CPPA-G and Managing Director NTDC, has explained the reasons behind the proposed amendment to the SBP circular.
According to the letter, restrictions on import of equipment are going to hamper IPPs availability for power generation if remedial measures are not taken immediately.
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On July 5, 2022 in an EPD circular, State Bank of Pakistan advised banks to seek prior approval from its Foreign Exchange Operations Department (FOED) for initiating import transactions against items mentioned in the circular. Later on the SBP, in another EPD circular of December 27, 2022 withdrew its circular with effect from January 2, 2023. Consequently, requests for import transactions already submitted were returned.
The IPPAC claim that alternatively, Section 3 (iii) of EPD Circular letter of December 27, 2022 has been provided for energy imports, however, it restricts the imports related to only petroleum group (oil and gas) and coal (for power projects based upon merit order of Ministry of Energy). Whereas, there is no mention of other essential imports of spare parts etc. for the repair and maintenances of power plants.According to the IPPAC, due to the said restrictions IPPs have been facing challenges in making payments to foreign suppliers against LCs and bank contracts which were opened after taking requisite approval from SBP.
“This has really hurt IPPs credibility with Original Equipment Manufacturers (OEMs) and they are not willing to accept new orders and dispatch the already ordered goods until their pending payments are released in full,” stated the 14 members of IPPAC
According to Implementation Agreement between GOP and IPPs timely availability of the required foreign exchange to IPPs is ensured. Regular import of spare parts is required for periodic and breakdown maintenance of plant and machinery. After the imposed restrictions, requests for opening of LCs are not being entertained by banks due to non-availability of foreign exchange.
The IPPAC is of the view that non-availability of spare parts due to import restrictions will result in stoppage of these plants which are very reliable in terms of plant availability in summer. Consequently, National Grid will have to suffer power shortfall despite available installed capacity. The stoppage of thermal power plants will have compounding impact as it may cause clogging in the fuel supply chain eventually resulting in slowing down the country’s economy.
In view of existing awkward situation, IPPAC has urged the concerned authorities to coordinate with the SBP for treating imports by IPPs as essential imports by amending the circular (EPD Circular Letter No. 20 of 2022). The IPPAC has proposed that the existing provisions of the circular which states that imports related to petroleum group (oil and gas) and coal (for power projects-based upon merit order of Ministry of Energy) be replaced with the wording “imports by petroleum group (oil and gas) and power generation companies connected with National Grid.”
The private power generation companies have requested concerned authorities to take up this matter with the SBP on most urgent basis and facilitate in resolving issues of LC and payments under respective O&M agreements for parts and services and give them opportunity of meeting to apprise them of the criticality of the matter for whole power generation supply chain system.
The power companies which have written letter are: (i) M/s Atlas; (ii) Attock Gen Ltd; (iii) M/s Halmore Power Generation Company (Pvt) Ltd; (iv) Kohinoor Energy Ltd; (v) Lalpir Power Ltd; (vi) Liberty Power Tech Ltd; (vii) M/s NishatChunian Power Ltd; (viii) Nishat Power Ltd; (ix) Orient Power Company (Pvt) Ltd; (x) Pakgen Power Ltd; (xi) Rousch Pakistan Power Ltd; (xii) Saphire Electric Company Limited; (xiii) Uch Power (Private Limited and; (xiv) Uch-II Power (Private Limited).
Copyright Business Recorder, 2023