New approach for private power tariffs
The Pakistan government has announced a new international competitive bidding process for determining tariffs for private power projects. The announcement has come soon after the government issued cancellation notices to eight IPPs on the grounds of corruption and violation of their agreements.
The new policy is in contrast with the current up-front tariff approach of the current policy. It will offer local coal reserves and hydropower resources to international private investors in order to keep pace with the country`s current power demand. The aim of the policy is to provide cheap electricity by tapping indigenous resources.
Projects under the new policy will be established on a build-own-operate-transfer basis. The government will identify sites and conduct feasibility studies prior to offering projects.
In late June the government terminated a power purchase agreement with Southern Electric Power Co. and issued cancellation notices to eight IPPs.
The projects include Uch power Project; Kohinoor Energy Ltd.; Sabha Power; AES Lal Pir; AES PakGen; and Habibullah Coastal Energy.
The World Bank, which funded many of the projects, has intervened asking the government for information.