"There is nothing wrong with the Rental Power Project - the projects are being legitimately processed in a very transparent manner......and are the only viable option", so reads the governments reply to ADBs audit report on the infamous RPPs.
In a perfect world, this reply would have settled all the dust and would have made ADBs report look a bundle of false findings. But alas, such is not the case. The 150 pages reply seems to have a number of contradictions, confessions and a series of misreported facts - making it look an exercise carried in desperation to justify the project at all costs.
The government has out rightly rejected ADBs findings of the unutilized capacity of 1000 MW in the system, while stressing on the argument that the power generation capacity is optimally utilized. This is bizarre, as it was just a couple of weeks back when Nepras chief media person was heard discussing the 1000-1200 unutilized capacity in the system in a conference hosted by the Competition Commission of Pakistan at a hotel in Karachi.
The reply from the ministry also has a good news for the nation, which could have certainly made headlines across Pakistan, only if it had it been noticed. The document says the government had resolved the issue of circular debt last year through the issuance of Rs80 billion worth of TFCs back then.
The ADB report on the other hand has an entirely different perspective on the circular debt issue as it claims the amount has reached a staggering Rs291 billion, hampering the process of optimal capacity utilization.
Not that a third party finding is necessarily required to point at the falsehood of this claim - as our dear Finance Minister himself has accepted that the circular debt still exists and efforts are underway to resolve the issue.
It seems that power ministry officials need to update themselves, since they have used the Planning Commissions 2007 forecasts of GDP as the basis of energy demand outlook. The countrys economic managers would like to give anything and everything to achieve an average annual GDP growth rate of 7.5 to 8 percent for the next five years. But as unreal as it seems, the ADB has tried to bring down the RPP brainchild to earth, by using the IMF forecasts of 2-3.5 percent as the basis of their assumptions.
There is every reason to believe that such high GDP forecast was assumed to provide rationale and strength to the idea of having a short term fix in RPPs. But, besides being partially successful in lobbying for the case, it also backfired as the high demand forecasts led to higher power deficits and thus higher tariffs in the end.
Interestingly, the reply to ADBs report presumably drafted by the power ministry, points that if all the 14 RPPs are allowed to operate, power tariff for the customers could increase by as much as 87 percent by FY11 in comparison to the 58 percent tariff hike, under no RPP scenario. So much for the minimal and
egligible tariff increase, publicized by the ministry!
It is yet to be seen whether the government reverts back to the 7 percent mobilization advance to the RPPs as all contractors have missed the initially agreed upon commencement date. The government response emphasizes that the 14 percent mobilization advance was meant to speed up the process - now, when all RPPs have new tentative commencement deadlines, it is the governments duty not to allow the 14 percent mobilization advance.
The ADB has recommended to shelve five of the under process RPPs and has given the go ahead nod to only eight of them. With the ministry stressing that there is nothing wrong in the process, it remains to be seen whether the ADB recommendations are acted upon or not.
* This is the third and last part of our coverage on how rental power projects form a classic case of mismanagement on the part of the government.