Tuesday, July 5, 2022

Pakistan government aims to buy all private fuel oil-fired power plants


Zubair Yaqoob
The author has diversified experience in investigative journalism. He is Chief content editor at wnobserver.com

The government of Pakistan is evaluating buying all of Pakistan’s private fuel oil-fired power plants, including Hub Power Co. (HUBCO), at a one-time cost that would help it save at least Rs300 billion on payments over the next seven years, Tabish Gauhar, Special Assistant to Prime Minister (SAPM) on energy said.

Meanwhile, government will pay Rs400 billion to the Independent Power Producers (IPPs) by the end of this fiscal year, while banks would be requested to restructure the remaining debt.

“If we don’t deal with the rising debt, it would double to Rs4.5 trillion by June 2023,” Tabish Gauhar said.

The electricity tariff for the end-users, such as households and businesses would also be increased over the next few years, Gauhar said.

He advocated the plan where the Guddu and Nandipur power plants will settle overdue payments with fuel supplier Pakistan State Oil (PSO) by giving them equity in their plants.

The energy ministry is also planning to incentivize refineries to make $2 billion worth of upgrades by providing operators with duty protections, he said.

The incentive policy will be announced before the upcoming federal budget for the next year, which will boost competitiveness, as many refineries in Pakistan produce a type of fuel oil that isn’t in demand anymore.

Pakistan is struggling to retire Rs2.2 trillion debt owed to the energy sector, a liability that’s doubled in the past two years as power purchases outstripped demand.

Reducing energy sector liabilities is of high importance since it is one of the International Monetary Fund’s conditions for providing Pakistan with a $6 billion bailout loan.

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