Pursuant to decision of the Economic Coordination Committee of the Cabinet (the ECC) in Case No. ECC-169/13/2007 dated November 13, 2007 approved "National Policy for Power Co-Generation by Sugar Industry" (the Co-Gen Policy). The Salient Features of the Co-Gen Policy are elaborated below:

 i)             The incentives available to the Independent Power Plants under Policy for Power Generation Projects 2002 would be available to the Power Co-Generation units of Sugar Mills.

 ii)            The Power generated by the Sugar Industry will be purchased by NTDC or DISCO concerned at agreed/negotiated and competitive rates to be approved by NEPRA. Power Sale / Purchase Agreements, valid during the life of the Power Co-Generation units, will be signed with Sugar Mills on the lines of the Agreements signed with the IPPs.

 iii)           Bagasse and imported/local coal will be consumed as per requirement of the plant without any limitation of inter- changeability.

 iv)           The co-generation power projects will be developed on Fast Track Basis and there will be no requirement of pre-qualification, feasibility study and Letter of Interest (LOl) by PPIB. The Sugar Industry will be issued Letter of Support (LOS) by PPIB after upfront tariff has been determined by the NEPRA.

 v)            The sugar mills selected for power Co-Generation will be required to set up the plant on fast track basis but not later than 36 months of issuance of Letter of Support (LOS) since basic infrastructure is already in place.

 vi)           It will be the responsibility of the Sugar Mills to make all other arrangement like bank financing, purchase of land, procurement of machinery etc.

 The ECC further decided that:‑

 a)         Such power co‑generation plants/units, will not be treated as part of sugar industry, but as a separate entity for tax purposes.

 b)         The existing tariff rules and guidelines for the IPPs would be applicable for such power generation plants/units.

Revised Guidelines for Processing Unsolicited Raw Site Co‑Generation Power Project Proposals from Sugar Mills

Pursuant to the aforesaid ECC decision, following procedure shall be followed for establishing Co-Generation Power Projects by Sugar Mills.

1.            Pakistan Sugar Mills Association (PSMA) shall approach NEPRA for tariff for Bagasse based Co-Generation Power Projects.

2.            Based on the tariff worked out by NEPRA on PSMA’s recommendations / feasibility study, the interested parties will register with PPIB after depositing the requisite fees, and submit a detailed proposal on the proposed project to PPIB.

3.            The main sponsor for each proposed project must include an owner of a sugar mill. The project proposal must include documentary evidence to this effect.

4.            PPIB would acknowledge the interest / proposal of sponsors and advise them to approach NEPRA for issuance of Generation License and Tariff determination

5.            After issuance of Generation License and determination of Tariff for specific project by NEPRA, the sponsors would communicate acceptance of the Tariff to PPIB.

6.            PPIB shall advise the Sponsors to submit Performance Guarantee (PG) @ US$ 5,000 per MW and Processing / Legal Fee of US$ 100,000/-

7.            Upon receipt of PG, Processing / Legal Fee and Milestones for project processing by PPIB, the Letter of Support (LOS) will be issued to the sponsors.

8.            The Sponsors will be required to achieve Financial Close within 09 months from the date of issuance of LOS

9.            Project Documents like IA, PPA, FSA. Loan Documents etc. will then be finalized between respective parties.

10.         The Sponsors will have to set-up the project within 36 months after issuance of LOS.