ISLAMABAD: The government said on Wednesday that it had put on hold all power projects based on imported coal, except one in Sahiwal, and would instead set up LNG-based plants of 3,600MW in major load centres of Lahore, Multan and Faisalabad at a maximum generation cost of Rs8.85 per unit.

At a background briefing, a senior official told newsmen that the country`s future and energy security depended on domesticcoal and hydropower generation because of its stable-to-declining costs overthelongerrun,butthe short-term solution to the energy crisis had now been put on a project which would use liquefied natural gas.

He said the five major coalbased projects previously planned for Punjab had been dropped for the time being, except the 1,360MW plant in Sahiwal, because so much reliance on imported coal required huge investments in port facilities, excessive expenditures on upgradation of Pakistan Railways and, on top of all, environmental concerns and longer time required to complete the exercise.

Moreover, the coal-based projects attracted investments onlyfrom China, while investors from all over the world showed interest in LNG-based projects.

He said Sahiwal coal project was not being pursued as part of China-Pakistan Economic Corridor Project`s `early harvest programme` for completion by 2017.

The official said the ministry of water and power submitted a request to the National Electric Power Regulatory Authority (Nepra) on Wednesday, seeking approval of an upfront tariff of Rs8.85 per kilowatt hour (unit) for LNG-based projects with a total capacity of 3,600MW in Lahore, Multan and Faisalabad where the power shortfall was serious and transmission line capacity was adequate.

He said it was a much better option than setting up LNG-based projects near Karachi and bringing their generation from south to north where transmission system was already congested and stressed out.

The official said the power ministry had been able to save about Rs96 billion in the circular debt since October last year, primarily by closing expensive plants and utilising generation capacity on the basis of economic merit.

He said LNG-based power plants would come on stream in two to three years because they could be set up in 18 months and the government had already ordered the laying of a 1,100km north-south pipeline to transport gas. He expressed the hope that there would be zero outages by 2017-18, while electricity supplyin the coming summer would increase to 16,500-17,000MW from last year`s peak of 14,700MW.

Responding to a question about payments concerns of LNG-based projects because of the circular debt, the official said a special mechanism would be put in place outside the circular debt to ensure timely payments to LNG suppliers. He said the mechanism was currently in the brainstorming phase and hinted at creation of an Escrow account that would route bill recoveries directly to LNG-based power projects to ensure smooth financial flows between power plants and LNG suppliers.

The government, he said, had managed to contain the circular debt at Rs252bn and it wouldkeep on reducing it with improved recovery of bills and clearing dues to IPPs, gas companies, Wapda and nuclear power plants. He admitted that the power sector had emerged as a sick sector with a black hole in the country`s economy and the government was trying to put the sector on path to correction.

The ofHcial said the government had introduced smart metering in Peshawar and Multan to be followed by, in two to three months, in Islamabad and Gujranwala. On completion of the scheme it would be possible to remotely control electricity demand and the load factor all over the country. The system would ensure, for example, that nobody would be able to run air-conditioners in peak times and everybody was able to use fans and lights.

The power sector is dependent on imported fuel and electricity generation cost was higher and there is 25 to 35 per cent power deficit. He said the government had managed to bring down the circular debt in the first seven months of the current financial year from Rs321bn last year. It was estimated to have swelled to Rs350bn so far.The official said the circular debt had increased mainly because of lower than reasonable tariff, inefficiency and theft and the subsidy announced for AJK and Fata, tube-wells and agriculture which was not paid by the centre and some time by provincial governments. He said policy directives had been issued to Nepra to allow reasonable allowances on all these accounts to avoid resurfacing of the circular debt, but conceded that the government had failed to recover electricity bills from public sector consumers.