Independent Power Producers: A blow to Pakistan’s economy

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Former caretaker minister for Commerce and Industries, Dr Gohar Ejaz, has said that governments are policymakers and regulators and are not competent to do business. Taking to social media platform X on Monday, Dr Ejaz advocated privatising the sector. He stated, “Government is a Policymaker and A Regulator. It is not Competent to Do Business, and the Power Sector is the True Face of Its incompetence and is forcing misery on All Electric consumers of Pakistan by Enforcing these IPP Agreements for the benefit of these 40 companies on 240 million people.

The capacity charges of Rs 2 trillion plus, which should be 8 per unit, are being charged at Rs 24 per unit due to non-operations and over-invoicing of these power plants being managed and half being operated by the government. All should be privatised. All power sectors should be operated as merchant plants through electricity exchanges, selling electricity at the cheapest rates to privatised discos, not at fixed capacity charges, and passing through fuels. Electricity will cost less than half, Rs 30 per unit, against Rs 60 per unit, for all domestic, commercial, and industry consumers. We are all victims of Incompetence”.

The former caretaker minister previously stated that the actual power tariff should be below Rs. 8 per unit, but the government is charging Rs. 60 per unit due to flawed contracts with Independent Power Producers (IPPs).

“Why was Rs 2 trillion capacity payment Paid to power plants last year, which is costing all consumers Rs 24 per unit when the actual cost should be below Rs 8 per unit? Payments were made for idle capacity to IPP; they should be paid only for power produced and delivered to National Grid,” the former minister wrote in a tweet on X.

He said, “These contracts with IPPs have conditions of ” Take or Pay, “which must be cancelled. As per the contracts, The Capacity Payment charges are to be paid even if Electricity is not produced by these IPPs, which is unsustainable; these Electricity tariffs of Rs 60 or 21 cents do not exist anywhere in the world”.

“If Electricity is bought from Cheapest electricity Suppliers without Capacity Payment and Treated as Merchant Suppliers, Electricity Prices will come below Rs 30 per unit instead of Rs 60 per unit plus today,” he added.

The minister said in another tweet that, as per NEPRA’s July 2023 order, Fixed Capacity Payments to all generators were projected to total Rs. 1.954 trillion in 2023-24.

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