New power projects: Govt removes FSA guarantee requirement

ISLAMABAD: The federal government has removed the requirement for Fuel Supply Agreement (FSA) guarantees for new power projects, a feature that was previously included in the documentation for the Private Power & Infrastructure Board (PPIB).

This was revealed by the Managing Director of PPIB, Shah Jahan Mirza, during a public hearing on a suo motu case initiated by Nepra regarding the PPIB fee of $250/MW to be recovered from consumers, similar to other power sector entities like Nepra, CPPA-G, NTDC, and DISCOs.

PPIB had been collecting the fee from power projects, but two years ago, Nepra halted its collection. As a result, PPIB is now facing a financial crunch and struggling to manage its operations effectively.

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The proposed PPIB fee, which would apply to an installed generation capacity of 19,896 MW and a transmission line capacity of 4,000 MW, has been estimated to have an impact of Paisa 1.1 per unit for one year. If Nepra also approves the recovery of the backlog from the previous three years, the one-time impact will amount to $15.3 million (Rs 4.2 billion), or Paisa 3.3 per unit, to be recovered through the Quarterly Tariff Adjustment (QTA).

The MD of PPIB explained the board’s role post-commercial operation date, which includes:

(i) resolve issues of re-settlement;

(ii) coordinate and facilitate in the arrangement of security for the project; (iii) support IPPs in settlement of disputes with GoP/AJ&K entities;

(iv) evaluate technical experience and financial net worth of new sponsors/shareholders;

(v) issue of NOC for changes in shareholding;

(vi) PPIB issues various NOC(s) for different players in the project to ensure national security interest;

(vii) resolve gas depletion and alternate fuel issues;

(viii) resolve issues for availability of fuel/gas for smooth operations of Complex(s);

(ix) reform its role as the face of the GoP for all disputes raised by IPPs pursuant to the dispute resolution clause of the IA and any arbitration commenced thereafter.

He further stated that due to the unsatisfactory financial health of DISCOs, PPIB extends a power purchase guarantee on behalf of the Government of Pakistan.

The PPIB meets its financial needs through the fees collected and interest on bank deposits. However, the MD did not disclose the total amount held in the bank, board members’ meeting fees, or the reason for not providing consumer representation, given that consumers ultimately pay for PPIB’s expenses.

The MD emphasized that all electricity generated by IPPs is supplied to the National Grid and consumed by the public, and thus, consumers are responsible for funding PPIB through the tariff.

In response to a question, he assured the representative of Atlas Solar that the issue of charging the fee in rupees instead of dollars would be discussed at the PPIB Board meeting.

The representative of the Punjab Power Development Board (PPDB) requested an equal share of the fee to be recovered, as the PPDB is also a party to agreements with power plants established in Punjab. The MD suggested that the PPIB Board, which also represents the provinces, should address this matter.

Representatives from solar power projects and QATPL also raised concerns regarding the rationale behind the PPIB fee for power projects.

NEPRA Chairman, along with the members from KPK, Technical, and Law, raised technical questions, including concerns about PPIB overstepping the role of CPPA-G.

Industry representatives rejected the proposal outright, stating that with the implementation of a competitive electricity market, the role of PPIB has become redundant. They even proposed its dissolution.

“Prime Minister and Power Minister Awais Leghari are working to reduce tariffs, but PPIB is attempting to increase them, despite its redundant role,” said Rehan Jawed, a representative of Kati. He argued that inefficiencies in the sector are being passed onto consumers and that the current power sector performance, coupled with a heavy financial burden on businesses, is discouraging industrial investment in the country.

Jawed also warned that electricity demand will continue to decline and urged Nepra to act before the situation worsens. He criticized Nepra for failing to pass on the Rs 3 per unit benefit to Karachi Electric consumers for November 2024.

Copyright Business Recorder, 2025