Revision of IPPs contracts should be included in constitutional amendment draft: PBF

KARACHI: The Pakistan Business Forum (PBF) has urged the federal government to include the revision of power contracts with independent power producers (IPPs) in the draft of the 26th constitutional amendment before presenting it to parliament.

This move is aimed at addressing the crisis facing the country’s industry due to unaffordable electricity rates caused by excessive capacity charges.President of the PBF Khawaja Mehboob-ur-Rahman highlighted that while the country has a power generation capacity of 45,000MW, only 22,000MW is delivered through the main transmission lines. Consumers are still required to pay for unused electricity. “We are burdened with 56 per cent of the cost in capacity charges due to unfair contracts with IPPs,” he stated.

Rahman questioned, “Does the government want to save a few individuals or the 240 million Pakistanis?” He added that the current electricity rates are so high that industries are struggling to keep their factories operational, leading many to shut down.

He highlighted the urgency of revising electricity rates and urged the government to take immediate action to address the issue, warning that once the industry is shut down, it will be difficult to revive it.

The business community is committed to supporting the country and the government in achieving long-term growth and aims to contribute $100 billion by the end of 2030. However, this goal requires addressing issues such as electricity tariffs to reduce production costs and enhance the competitiveness of the industry.

Rahman also questioned the rationale behind paying capacity charges to government power plants and called for a forensic audit of all power facilities. He pointed out that the government’s debt to local banks has reached Rs50 trillion, with Rs30 trillion in current accounts. Banks pay 10 per cent interest on deposits but charge 22 per cent interest on loans to the government, creating an unsustainable financial burden.

The PBF has urged the government to set electricity prices at Rs25 per unit.Rahman further noted that the defence budget stands at Rs2,500 billion, with substantial amounts allocated for interest payments. He argued that lower interest rates and cheaper electricity would stimulate industry growth and national development. High interest rates, he observed, incentivize people to deposit money in banks rather than invest or start businesses.

In the 2023-24 financial year, it is feared that distribution companies (Discos) may incur a loss of Rs589 billion, including losses beyond the threshold set by the National Electric Power Regulatory Authority (Nepra), the PBF added.