Islamabad: The government has decided to set up five new private sector LNG power plants to generate 1,000MW, blocking a move by the petroleum ministry to establish them in violation of the rules of business.
The decision has saved the government from another scandal as the Ministry of Petroleum and Natural Resources had initiated the process to carry out a task which was the responsibility of the Ministry of Water and Power, official documents and discussion with officials revealed.
It once again highlights governance issues as the petroleum ministry came up with the plan haphazardly, ignoring other ministries in the process. Finance Minister Ishaq Dar eventually blocked the move, sources said.
The LNG-fired power plants will still be set up and will be offered to independent power producers (IPPs). In place of the petroleum ministry’s intended plan to establish them through a mix of government and commercial financing, they will now be funded by the private sector.
So far, the sites proposed for the five plants are Lahore, Faisalabad and Multan in Punjab, Sukkur in Sindh and Mardan in Khyber-Pakhtunkhwa, senior government officials said. The government is already working on three LNG power plants in Punjab which are projected to generate a total of 3,600MW.
Instead of the petroleum ministry, the water and power ministry’s Private Power and Infrastructure Board (PPIB) will now handle the bidding for plants, a top government official said. Bids will be invited against the upfront Rs10 per unit tariff for LNG power plants and whoever gives a better rate than that will be awarded the contract.
The decision to this effect was taken on Thursday in a meeting chaired by Finance Minister Ishaq Dar and attended by Petroleum Minister Shahid Khaqan Abbasi, Water and Power Minister Khawaja Asif and Prime Minister’s Secretary Fawad Hasan Fawad.
“The meeting considered different modes for undertaking these projects and directed officials concerned to put up a proposal for consideration and subsequently putting in place the mechanism for implementation of the projects in the private sector,” a finance ministry handout said.
“It emphasised that the proposal for the 1,000MW projects should guarantee complete transparency and minimum possible tariff,” it added. The meeting resolved that these projects are to be undertaken on a fast track basis and should be up and ready by April 2017.
Petroleum ministry’s plan
Under the rules of business, matters related to power generation, transmission and distribution are the responsibility of the water and power ministry. But the petroleum ministry overstepped its mandate and came up with a plan to set up five new LNG power plants, the ministry’s documents showed.
To handle the new plants, the ministry sought to set up five subsidiaries of the Government Holding Private Limited (GHPL). The petroleum ministry owns GHPL.
The law ministry had advised the petroleum ministry to examine the Articles and Memorandum of Association to find out whether the proposed subsidiary companies can be established by GHPL. Under the existing Articles of Association, GHPL cannot enter into a contract regarding or own or operate a power plant while managing LNG terminals.
However, the petroleum ministry went for bidding without amending relevant articles, prompting Finance Minister Dar to block the move, officials said. According to them, Dar said handing over any task related to power generation to the petroleum ministry could become an issue for the government later. The finance ministry advised the petroleum ministry to restrict GHPL to oil and gas exploration.
Neither the petroleum minister nor Petroleum Secretary Arshad Mirza were available for comments.