Cash-strapped govt ‘reluctant’ to pay IPPs’ dues

lahore — Struggling to meet its budget deficit target of 3.8 per cent for the ongoing financial year, the cash-strapped government does not appear in a mood to pay back private power producers their bills (commonly known as ‘circular debt’) amounting to more than Rs250 billion — at least not anytime soon, reports Dawn online.

The recent correspondence between power companies and the Private Power Infrastructure Board (PPIB) shows that the government is turning up heat on the independent power producers (IPPs) for demanding payment of their overdue bills.

According to a letter sent to the 13 IPPs that had invoked sovereign guarantees on March 2 for the recovery of a portion of their long outstanding bills amounting to Rs48 billion, the board has rejected their call. Besides, it has put them on a legal notice for running what it termed a false and malicious advertisement campaign against the government in newspapers.

The power producers claim that the government owes them Rs253 billion as per its own record. The total size of the unpaid bills of the power sector is said to have shot up to Rs414 billion if the dues of the public sector companies are also considered.

The PPIB held a meeting with the power companies on March 10 after receiving notices invoking sovereign guarantees and assured the producers that the matter would be settled through talks. But something changed in the evening and the board sent letters rejecting the IPPs’ call for invoking sovereign guarantees. It also called off the second meeting with the industry at the last minute.

Explaining the reasons for rejection of the IPPs’ notices, the board said the power companies did not adhere to the procedure prescribed in the power purchase agreements for making such a demand. “The purported demand under the Guarantee, among others, was neither made in the prescribed manner nor any prior written default notice for non-payment by the power purchaser of such claimed amount was served on the government,” the board wrote to the companies on March 10 and 18.