THANKS BUT NO THANKS IPP COMMISSION.

Byline: AROOJ ASGHAR

Thanks to the government for forming a commission to look into the matters Pakistan's power sector is facing over the years but no thanks to the IPP Commission ("Commission") for creating confusion. As a matter of fact; development of the power sector is highly contingent upon the growth of the country. It was prudent to install power projects, in anticipation of economic growth.

Almost all the other sectors and state owned enterprises (SOEs) are in bad shape and are relying on government support and subsidies. One of the most sorted out questions by local and international investors till 2015 was if electricity would be available for their upcoming projects. Who knew at that time that entire system would get stuck because of some non-issues.

There is a segment in Pakistan's economy which always wants concessions; be it the interest rates or export rebate, subsidies or any plus minus status, the exports and profits of that sector never increase significantly therefore, putting all the blame to higher cost of electricity is just an excuse. There is a limit to increase the electricity price of end consumers whereas there are limited ways to reduce the tariu of existing IPPs. Policy makers should spend more time on the revival of industry by other means and measures than spending more time on finding ways to reduce the returns of IPPs.

A large part of the report of the Commission ("Report") consists of evaluation on Return of Equity (ROE) and Return on Debt (ROD) components of IPPs. Unfortunately; it seems that the calculations and resultant conclusions are based on wrong interpretation of the provisions.

Ministry of Power with the help of a foreign legal counsel prepared the Standardized Power Purchase Agreement (PPA) and IA back in 2006-07, which was reviewed, discussed and approved by the then Economic Coordination Committee (ECC). The purpose of getting approval from ECC was to provide a framework to PPIB, AEDB and CPPA. CPPA cannot dilute the rights and also cannot increase the obligations of Government of Pakistan (GoP) therefore, it has to negotiate under the framework of Standardized PPA duly approved by the ECC. PPA says that ROE will be indexed quarterly (April, June, Sept and Dec) on the basis of average of last three month's US dollar rate and invoicing will be done on monthly basis with 30 days credit to CPPA.

Being from the power sector; I never felt comfortable with the concept of allowing dollar indexation...