PEPCO Awards Rs 280 Crore Project to Philips Pakistan – Payment will be Made from International Loans
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According to a public release, PEPCO carried out supply contract of 20 million Compact Fluorescent Lamps (CFL) on cost insurance and place of destination (CIP) under the “National CFL Project – Prime Minister Energy Saver Programme” with Philips Electrical Industries of Pakistan. The total cost of this project (20 million CFLs) is Rs 280 Crore and is being funded by Asian Development Bank and AFD of France. 
The contract between Philips Pakistan and PEPCO was signed by Khalid Hussain Rai of PEPCO and Philips Chairman and CEO Asad.S Jaffer at Wapda House.
PEPCO spokesman said the project started on the directive of Prime Minister Syed Yousaf Raza Gilani duly approved from Cabinet as well as ECNEC.
Under the contract the first consignment of CFLs (energy savers) will be delivered to 36 warehouses all over the country within 12 weeks and free distribution of energy savers to consumers will start soon after the delivery. Ministry of Water and Power will carry out overall project management and PEPCO will act as project coordinator whereas DISCOs and KESC will act as executors, he added.
Features of Contract
Dilating upon the features of the contract, the spokesman said that the cost of per energy saver was Rs140 including the cost of insurance, freight charges to final destination, cost of containers along with inland transportation and port handling charges.
The life of CFL is 10,000 hours with two years warranty whereas the market price of Philips CFL is Rs189 with life of 8,000 hours and one year warranty only. The difference of price will save a substantial amount of Rs 98 Crore, according to the spokesman.
It is said: “The project will help in reducing peak demand over 1000MW, an amount $1.84 billion will be saved while avoiding overall generation of 1600MW. The project will yield Clean Development Mechanism (CDM) thus revenue of about $ 32 million will be returned by 2018.
It will also help in reducing consumers bill Rs300 per bulb per annum. The electricity saved can be sold to higher tariff consumers generating additional revenue of approximately $ 29 million per year for DISCOs.”
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only LoI is being issued. contract is not executed yet. other Chinese bidders quoted much lower pricing
This is indeed a good initiative and makes business sense. However, the following points must be considered:
1. This should have been a competitive process and decided on the basis of rates quoted by other companies if cost saving was the only point.
2. Who will control the resale of these lamps by consumers as anything that comes in for free has the history of being sold in the open market on much cheaper rates.
3. What are the remedies for domestic companies producing normal light bulbs who will lose revenue as a result of this shift?
4. Does Phillips have the capacity to produce such high quantities of lamps and manage logistics of 20 million lamps up to the doorstep?
5. How many lamps per household are being given? What is the time frame for implementation?
6. What will be done with the 20 million regular bulbs? Will Phillips use these for recycling? Any benefits from such should be deducted from the contractual payments.
7. Will the lamps under warranty be replaced by normal shopkeepers or there will be a separate mechanism for claiming warranties as these lamps have longer life?
8. Will similar lamps be provided in warranty or normal lamps with lesser life hours be provided?
9. The government should also consider replacing the street light and road side pole bulbs (highways, main roads) with LED type solar powered bulbs as it will save substantial amount of money and instead of turning these bulbs off to save power which results into accidents and crimes that the consumers face, government will provide better and well lit streets and roads. There are companies in the market who are willing to do this. This initiative can also be competed internationally.