Slain Chinese were working on power projects

ISLAMABAD: Finance Minister Senator Mohammad Aurangzeb has said a single-day strike/strife is estimated to cause cumulative losses of Rs190 billion to the national kitty.

He was referring to the recent strife caused by the PTI, halting economic activities, especially in the twin cities, and other parts of the country last week. Addressing a televised speech on Tuesday, he said the Economic Advisory Wing of the Ministry of Finance assessed the economic losses and came up with a whopping figure of Rs190 billion owing to halt of economic activities. He condemned a terrorist attack on Chinese citizens, extending condolences to the Chinese government and people and reminded that he along with Power Minister Awais Leghari had led negotiations with power companies by requesting them on debt re-profile and extended maturity due to which the government might bring a reduction in power tariff. The personnel of negotiating IPPs were attacked in Karachi, he said and termed it a highly unfortunate episode.

He said that on his directives, the Economic Advisory Wing formally calculated the adverse impact, taking in account losses in gross domestic product, tax revenue, law-enforcement costs, business and export losses, foreign direct investment flow and information technology. The social sector was also affected including hospitals, construction workers, street vendors and taxi drivers. Around 0.8 million people in Islamabad suffered for 2-3 days. Currently, Pakistan’s total GDP stood at Rs124 trillion, with Q2 estimates at Rs32 trillion and on that basis, the losses were estimated.

On the economic front, he said macroeconomic stability had begun to take hold with currency stability and $10.7 billion in reserves, following the International Monetary Fund’s tranche. Inflation has dropped to 6.9%, a 44-month low, with all three elements – headline inflation, core inflation and average inflation – now in a single digit. He expressed optimism that the policy rate would gradually decrease in the upcoming State Bank of Pakistan (SBP) monetary policy meeting.

He emphasized that the Karachi inter-bank offered rate, a key factor, was already below the expected level. Furthermore, the government reduced its borrowing to minimize debt servicing costs, enabling banks to lend more to the private sector. He asked the citizens to avoid activities harming the economy, emphasizing the government’s commitment to consolidating its economic position and achieving sustainable growth.

Meanwhile, addressing a seminar titled “Powering a Sustainable Future: Identifying Problems and Solving Challenges in Electricity Generation, Transmission, and Distribution”, organized by the USPCASE-NIPS at the NUST Islamabad on Tuesday, Awais Leghari said Pakistan’s power sector was facing difficulties due to the addition of 1,200 megawatts through solar net metering every year, causing a burden of Rs100 billion on the rest of the pool of general consumers. The elite are going to recover the cost within less than two years with the installation of solar net metering at their rooftops while the rest of consumers will face a burden of Rs40 billion this year, Rs80 billion next year and Rs160 billion in the succeeding year. He said the government would have to opt for hard choices indicating that the policymakers were considering slapping additional charges on solar installation usage.

Former chairman National Electric Power Regulatory Authority (Nepra) Tauseef H Farooqi warned that with a massive upsurge in the installation of solar rooftops through grid and off-grid, there would be long queues in front of power distribution companies (Discos) for disconnection requests from the power consumers in the next few years. Some estimates suggest that the installed solar capacity has already peaked to 12,000 MW.

The minister said the cost of the Bhasha Dam stood at $7 billion and eviction of electricity was going to cost $3 billion, but how they could further burden the consumers. Opposing a 350 MW coal power plant at Gwadar, he said there was 17,000 MW electricity generation in the pipeline till 2034. He asked that the cost of power mix was high, so the consumption did not increase and consumers had to be burdened for payment of capacity charges. Despite having no guarantees of continuation of government or performing on his existing portfolio for five years, Leghari hoped that the electricity tariff could be brought down by Rs5 per unit over the medium term. He cited examples that the re-profiling of Chinese IPPs debt could bring down the tariff by Rs3.75 per unit, return on equity by Rs75 paisa and re-negotiation with five IPPs by 65 paisa over the medium term, totaling a possible reduction by over Rs5 per unit.

“I cannot guarantee how long we will remain in power or I will continue on this ministerial portfolio. If I continue on the existing job, the power tariff will be reduced in five years,” he said and added that the two Chinese nationals killed in Karachi were taking lead in negotiating debt re-profiling of Chinese IPPs. Pakistan had requested re-profiling of Chinese IPPs debt of $15.4 billion for extending its maturity for five years, so the overall debt would go up, but the extension in maturity period would help the government reduce the cost of electricity by Rs3.75 per unit.

The minister said the Cabinet Committee on Energy was all set to grant approval for independent market operations under which the CPPA would be abandoned. The power distribution companies (Discos) are facing annual losses of Rs600 billion, clearly indicating that the power sector is unsustainable. The way forward is that the government move towards privatizing Discos and striking concessional agreements. He said the government finalized arrangements of $2.5 billion loans with multilateral creditors, including the WB and ADB for bringing improvements in the transmission and distribution system. The government is working on an electric vehicle policy as the battery charging stations would be incentivized.

The former Nepra chairman said the basic problem in the power sector intensified because of flawed projections, reliance on import-led fuel and linking repayments to dollars.

K-Electric CEO Moonis Alvi said they envisaged a plan to invest $2 billion in bringing desired improvements. NUST Dean Dr Ashfaque Hassan Khan said the exchange rate depreciation caused Rs46 per unit escalation in the cost of electricity since 1994 to 2024. He said the wrong IPPs policy multiplied the woes of power sector. Linking of payments to dollars further aggravated the situation, making it hard for policy makers to find out solutions.