ISLAMABAD: The government on Thursday moved to revive controversial rental power plants (RPPs) under an improved scheme and allowed export of sugar and import of fertiliser.

A meeting of the Economic Coordination Committee (ECC) of the cabinet presided over by Finance Minister Ishaq Dar also approved an amount of $30 million for Pakistan International Airlines to facilitate procurement of eight aircraft from Qatar on dry lease.

On the recommendations of the Ministry of Water and Power, the ECC allowed revival of the controversial RPPs of PPP government under a new name — short-term independent power producers (STIPPs) — with improved terms and conditions, to partially bridge electricity shortfall.

“The power generation equipment imported under another scheme (RPPs) was declared illegal by the Supreme Court of Pakistan in its judgment of March 30, 2012,” said an official statement after the ECC meeting. The utilisation of the existing available generation capacity from short-term IPPs would be allowed, provided it was not in violation of the Supreme Court’s judgment, it added.

The apex court had declared the RPPs as illegal and void ab initio because of alleged wrongdoing in the award of RPPs contracts including huge mobilisation advance and expensive upfront tariffs. It was not immediately clear how the government planned to pursue corruption cases filed by the National Accountability Bureau (NAB) against former prime minister Pervez Ashraf and former finance minister Shaukat Tarin in the RPPs case.

The decision will immediately revive three RPPs of 260MW generation capacity and subsequently allow sponsors of other RPPs to stage a comeback. An official said that sponsors of three RPPs — 90MW Reshma Power, 100MW of Techno Power and 70MW of Gulf Power — had already reached an understanding with the government for revival. The ministries of finance, law, and water and power had supported the proposal.

They said the power ministry had proposed immediate utilisation of plant and machinery of the RPPs as STIPPs to meet rising gap between the demand and supply.

The sponsors of these three power projects had entered into settlement agreements of outstanding liability with the NAB. Consequently, plants and machinery of these power projects will be available for generation.

To avoid obsolescence of such plant and machinery and monetary claims under arbitration, the government has now prepared a fresh policy to utilise their capacity.

Under the policy, the sponsors would need to secure permissions from the relevant entities for the utilisation of plant and machinery and then incorporate special purpose company to obtain generation licence and fresh tariff determination from National Electric Power Regulatory Authority (Nepra), unlike the previous arrangement of an upfront tariff provided by the government.

Nepra would also set terms and conditions of the tariff that would be based on the basis of “take-and-pay”. This would mean the government or its designated entity would only charge the price of electricity actually delivered to the national grid.

The STIPPs would also have an option to sell electricity to bulk consumers such as housing societies and industrial parks without government’s guarantees and obligation of the public entities to buy all of the generated electricity. The term of power purchase agreement (PPA) shall be for three years and the sponsor would not be paid for capacity charges separately as was the case with previous schemes.

The draft PPA would be prepared by the national transmission company and would be separately approved by the ECC. No objection from NAB for utilisation of plant and machinery would be required but the sponsor of STIPP would have to waive claims of arbitration against the government and its entities to become eligible for short-term IPPs framework.

Sugar export: The ECC approved a proposal of the commerce ministry for export of 250,000 tonnes of the commodity by sugar mills from surplus stocks on first-come, first-served basis. The export would be made against irrecoverable letter of credit or a contract with 25 per cent non-refundable advance payment and shipment to be made within 45 days of the registration with the central bank. With this decision, the ECC also directed the industries ministry to ensure outstanding payments to sugar cane growers by sugar mills in coordination with the provincial governments.

Fertiliser import: The ECC also allowed import of 125,000 tonnes of urea fertiliser for the incoming Kharif (April to September season) 2014 to meet the demand as recommended by the Ministry of National Food Security under an international trade finance credit facility to avoid any pressure on foreign exchange reserves.

The ECC reiterated its decision to maintain retail price of Rs1,786 per bag of urea in the local market in close coordination with the provinces.

The ECC also constituted a four-member committee comprising ministers for water and power; petroleum and natural resources; food security; and industries and production to sort out the issue of supply of required gas to the local urea manufacturers.