Privatization of power plants has been suspended until further notice as per a presidential order, managing director of Saba Power and Energy Industry Holding Company told the Persian daily Donya-e-Eqtesad on Tuesday.
"President Hassan Rouhani has approved a proposal from his economy minister, Farhad Dejpasand, to suspend power plant privatization. Come March the administration itself will invest in new power projects," Donya-e-Eqtesad quoted Amir Anvari, who is also a private sector activist, as saying.
According to Anvari, the first point that strikes an informed observer is whether the government has enough money to build power stations. The other issue is why does it not clear its mountain of debt to private sector contractors whose plants are close to insolvency and on the verge of being shut down.
Anvari is of the opinion that senior government officials have “never had a correct understanding of privatization” and that explains why their plans have always failed to produce the desired results.
"So long as executive officials see private enterprise as their rival, privatization policies will not be compatible with Article 44 of the Islamic Republic Constitution based on which a large part of the functions of the Energy Ministry should be transferred to private companies," he said.
He went on to say that empowering the private sector and helping it achieve its true potential is "a compulsion, not convenience.”
Echoing the stance of many economic experts, he added, "It is indeed regrettable that instead embracing a sustainable approach to develop the key industry, the ministry is always focused on minimizing power outages during peak hours."
There is a strong belief in private enterprise that building new power plants will not solve the array of electricity generation challenges so long as power is sold at highly subsidized rates, which they insist do not make economic sense
According to Mohammad Bayat, the CEO of Neyshabour Combined Cycle Power Plant in Khorasan Razavi Province, owned by Saina Gostar Pardisan Company, the Energy Ministry owes his company $120 million. The delays, he complained, have created new financial problems for his company forced him not to take new projects.
Such stations require $1.5 million per annum to conduct overhaul operations.
There is a general feeling among private managers, including Bayat and Ibrahim Khoshgoftar, a member of Power Producers' Syndicate, that building new plants will not solve electricity generation challenges so long as power is sold at highly subsidized rates.
To evade power cuts some 8,000 megawatts of new power production capacity must be added to the national grid by June, of which 5,000 MW should come from thermal power plants now under construction.
"The figure is too optimistic and power cuts will be inevitable unless electricity tariffs are revised (upwards)," Bayat said.
Energy Ministry debt now exceeds $4 billion not only due to privatization policies gone wrong, but also because of disparities between real electricity prices that include cost of generation and transmission and what the people actually pay.
Generating each kilowatt-hour of electricity costs 887 rials (about 0.088 cents) while it is sold for 680 rials (about 0.068 cents).
