CSS Forums - Need information : Circular Debt and Rental Power Plants

ADB has declaimed to approve Water and Power Mininstry's Plan for 2250MW capacity addition through the Rental Power Projects saying it would need 31 to 45 % increase in consumer tariff and consume more than $ 5 bn (PKR 420bn) of nation's foreign exchange reserves.

ADB has assigned the job of 3rd party evaluation under a decision of Federal Cabinet to examine the agreement with RPPs.

ADB said that RPPs agreement has been [U]signed in haste[/U] without examining in detail the fiscal anf contractual obligations of the govt.

It is said by ADB that even if the 8 RPPs were completed, there will still be an unmet shortfall of about 600MW. It said, the govt should take in hand only 8 RPPs with a total generating capacity of atleast 1200MW. This would increase 24% power tariff in addition to 30% increase in electricity rates already committed by govt. with multilateral lenders under the IMF programme.

The ADB also did'nt accept Water and Power Mininstry's claim that rental tariff ranged 13 to 18% / unit and rated that effective tariff would remain between 14 to 22% / unit.

Zero load shedding claim by the Ministry in 3 to 6 months was not possible according to ADB.

It is said if govt, provide natural gas to all 14 RPPs then the tariff increase would be 31% and in case of furnance oil, it would be 45%.

If IPPs were purchased whole heartedly, the electricity shortfall could be overcome ion 18 to 24 months.

ADB said thar RPPs tariff was generally 3 to 5 % higher than the IPPs.

Agreementwith RPPs were signed in haste and was changed by the Private Power and Infrastructure Board in favour of sellers.

ADB also pointed out that existing logistic infrastructure did'nt match transportation requirements of the additional fuel oil needed for new RPPs. No supply arrangements has been put in place.

*** ADB (Asian Development Bank)