Playing deaf to all sorts of criticism, the cabinet has approved fast track rental power plants with cumulative capacity to produce 2250 megawatts of electricity. It makes it difficult to understand what these public representatives are trying to prove, knowing that the Economic Co-ordination Committee of the Cabinet had approved 14 RPPs of only 1500 MW.
Surprisingly, ECCs step in itself was in complete defiance to the governments agreement with IMF to add only 800 MW rental power to the system. According to Pakistans letter of intent to the IMF, Rs 55 billion worth of differential power subsidy, to be absorbed by the FY10 budget, has factored only 800MW additional rental plants.
This additional rental power will make matters worse for the government in December, when these proposed projects are expected to commence operations, as it will increase the requirement for power subsidy. And given fiscal constraints, either the government will have to jack up tariffs in excess of 18 percent, as agreed upon with the IMF, or sacrifice their favourite scapegoat - the development expenditure. Bear in mind that any delay in receipts of the Tokyo pledge is only going to make the situation even more difficult.
The ECC wants 750 MW of these rental plants to be run on gas which adds to the already controversial picture, considering the government will have to entertain the claims in the form of fuel interruption and gas supply interruption in the country.
Moreover, this will add to inefficiencies in the existing gas-based IPPs as they have reportedly shared their portion of gas with the rental plants which use double the amount of gas for generating electricity. These technical inefficiencies come on top of cost inefficiencies as rental power tariffs go as high as 15 cents/Kwh compared with IPPs average of 11-12 cents.
The cabinets hastily taken decision has also left many wondering that there might be some substance in the controversies surrounding rental power. For instance, its approval of 14 percent Government Mobilisation Advance - a monetary payment made by the government to the contractor for initial expenditure on site mobilisation - is also a major cause of concern as it negates the claims that the bidding process is transparent.
As a matter of fact, invitation for bids for RPPs did not include any such clause thereby sidelining many relatively smaller local investors who could have bid, had they been informed of this advance. Why was this information withheld at the time of inviting bids is a question perhaps the public accounts committee can better investigate.
So the gist is; the ECC transgressed IMFs consent, the cabinet transgressed ECC suggestions - all leaving many unanswered questions. On the face of it, this looks like a decision to fulfil the governments rather ambitious promise of ending power outages by December 2009. But how will the IMF react and how much would RPPs actually help the government to save grace remains to be seen.