According to IPPs, the total verified and audited amounts overdue to the power sector (excluding WAPDA hydel) stood at Rs414 billion on February 15, 2017. Out of this total, the verified, audited and undisputed overdue portion of Independent Power Producers (IPPs) is Rs254 billion. Most of the members of Independent Power Producers Advisory Council (IPPAC) have called the GoP guarantees for a portion of these overdue amounts.
The NTDC/GoP is effectively borrowing on the balance sheets of IPPs at much higher cost than it can borrow itself. Violating the contract provision in terms of payment priority/mechanism, interest payments of Rs51 billion to IPPs have not been paid for over a year, while IPPs have to pay their bankers on time for this borrowing.
There is a rapid build-up of GST refunds in billions, which are not being processed.
According to IPPAC, Lahore High Court ruled against FBR in the GST apportionment case, whereby FBR wants to disallow a portion of GST already paid by the IPPs. The FBR is challenging the ruling in the Supreme Court. If FBR prevails, this disallowed amount gets added to power price, and translates to approximately Rs58 billion/year new taxes on electricity. The FBR also wants to apply it retroactively for more than 5 years. The GoP needs to state whether or not it agrees with FBR and if it does not then it needs to clarify its policy.
In 2011-2013, many plants were intermittently shut down for lack of funds because of extended payments defaults by NTDC/WAPDA, yet NTDC/WAPDA imposed penalties on IPPs and illegally withheld Rs11 billion. On the same basis, Wapda has made claims of over Rs30 billion from older IPPs. Having lost this case by NTDC in an expert determination given by a renowned retired Supreme Court judge, the NTDC is neither paying nor following the contractual procedure of challenging it in international arbitration, while GoP is repeatedly trying to frustrate the process by going to lower courts in Pakistan.
Since NTDC is late in paying and not getting sufficient subsidy from the GoP, it is deducting amounts from the bills unilaterally in violation of the detailed billing dispute processes agreed upon possibly to delay payments.
The IPPs have claimed that repeated requests by IPPAC to the GOP to discuss these issues have gone unanswered.
The IPPAC is also of the view that since the GoP is making efforts to add approximately 7,000MW generation on coal and LNG in the system by 2018, this addition is likely to further increase the circular debt unless the GoP takes corrective measures.
Copyright Business Recorder, 2017