Islamabad: The government’s flagship project of a 600-MW solar plant at Muzaffargarh (South Punjab) is reportedly in jeopardy as Planning Commission (PC) has refused to extend funding due to resources constraint during the current fiscal year, well-informed sources told Business Recorder.
Planning Commission, sources said, has conveyed its inability to arrange funds in response to the Ministry of Energy (Power Division) O.M of March 4, 2023.
Majid Hussain Memon, Assistant Chief, in a letter, duly approved by the Secretary Ministry of Planning, Development, and Special Initiatives has informed Power Division that due to the non-availability of savings at this stage under the Public Sector Development Plan (2022-23), it is not feasible to provide additional funds of Rs 3.958 billion as Cash Development Loan (CDL) to Power Division for two unbudgeted projects approved by the Central Development Working Party (CDWP) on October 28, 2022, titled, land acquisition for installation of 600 MW solar power plant at district Muzaffargarh, (Rs 1.4 billion ) and land acquisition for installation of 600 MW solar power plant at Tehsil Athara, district Jhang (Rs 2.558 billion).
According to sources, the Ministry of Planning, Development, and Special Initiatives advised Power Division to explore possible savings within its budgeted portfolio and meet the minimum pressing demand of these projects through re-appropriation during CFY.
Ministry of Planning, Development, and Special Initiatives has also proposed that in case savings are not available within the budgeted portfolio, Power Division may approach Finance Division for the provision of requisite funds as CDL through Supplementary Grant for both projects, over and above the size of PSDP 2022-23.
In September last year, the government unveiled its policy on fast-track development of solar PV projects at an investors’ conference to offer projects of 600 MW.
The salient features of the policy are: (i) single stage, two-envelope bidding; (ii) straight-line tariff; (iii) 70 percent indexation of the tariff; (iv) benchmark tariff by Nepra; (v) guaranteed purchase of power; (vi) land and interconnection to be provided by GoP; (vii) exemption on all import-related duties and taxes; (viii) existing EPA & IA will be used; (ix) Commercial Operation Date (COD) within 12 months of Energy Purchase Agreement (EPA); (x) term-25 years on BOOT basis; (xi) 11.15 percent income tax; and (xii) payment guaranteed on 60th day after invoice through bank default.
Security documents are included in the GoP Implementation Agreement (IA), principal concession agreement, and backstops of all contractual obligations of public sector entities covering all fiscal and financial incentives, force majeure and change on law protections, etc.
The sources said several domestic and international parties including, United Arab Emirates, Qatar, Saudi Arabia, and China have shown interest in solar projects. Last month, Pakistan organized a road show in UAE to attract investment in solar projects.
Alternative Energy Development Board (AEDB), sources said, was also facing issues in the purchase of land in Muzaffargarh after the location of the project was shifted.
Courtesy Business Recorder, 2023
