Govt Takes A Big Decision Prior to Paying IPPs Under Revised Agreements

In a bold decision, the federal government has decided to hold back payments of Rs. 400 billion to independent power plants (IPPs) until they get clearance from the National Accountability Bureau (NAB).

The government had agreed to pay the IPPs under revised contracts and the first installment of Rs. 85 billion in this regard was due on Monday, March 29. However, the news reports suggest that the government has backtracked on its earlier decision.

The total dues of 47 IPPs are approximately Rs. 403 billion and the government was to pay 40 percent of it as the first installment in March under the revised agreements, with the remaining amount to be paid over the next six months.


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However, the Power Division has decided not to pay the IPPs established under the 2002 power policy until the NAB completes the probe against the IPPs that are allegedly involved in making excess profits.

The payment comprises 40 percent dues, which is nearly Rs. 85 billion, to eight independent power plants (IPPs), local media reported on Tuesday. The eight IPPs include HUBCO, KAPCO, and six other IPPs installed under the 1994 policy; Rousch, Fauji, PakGen Power, Lalpir Power, KEL, and Saba Power.

As a result of the default, experts are claiming that the revised contracts are no longer of any value because the government has failed to pay even the first installment. This payment of 40 percent dues is the most important condition for making the revised deals with IPPs operational, industrial sources told media.


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The Power Division had sent a summary to the ECC, asking for non-payment of dues to the IPPs until the NAB completes its investigation. This summary has reportedly also been withdrawn by the Power Division and included a recommendation for stalling the process to form local arbitration to resolve the issue of an excess profit of Rs. 55 billion.

Sources familiar with the matter suggest that despite the NAB’s ongoing investigation, there had been no issue in the clearing of the dues of power plants like HUBCO and KAPCO, and those of the IPPs established under the 1994 power policy. They claim that is simply the government’s failure to clear the dues.


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The sources added that this will also send a negative signal to the stock exchange sentiment which has already nosedived because of the spike in the coronavirus cases and fears of stringent measures in wake of the resumption of the IMF program.

However, the spokesman for the Power Division said that the non-payment does not mean that the agreements with the IPPs are void because the terms of the agreement allow the government 70 days to ensure the payment of the dues.

The spokesman also said that both the Power and Finance Divisions need the NAB validation letter as the NAB had taken suo moto of the entire IPP renegotiation deal. Moreover, the ECC’s approval is also needed for the summary that had been moved a month ago to authorize the payment notwithstanding the NAB’s inquiry.



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