Daily Times

Saquib Fayyaz Magoon, Acting President FPCCI, has said that federal government should cancel all agreements with Independent Power Producers (IPPs); and, procure electricity for the national grid from cheaper and cost-effective sources – without any strings vis-à-vis capacity charges. Saquib Fayyaz Magoon, Acting President FPCCI, informed that exorbitant and unbearable electricity tariffs have led to widespread industrial closures and massive job losses. There is an installed generation capacity of over 40,000 MW; while peak demand and transmission capacity is merely 25,000 MW – resulting in a significant excess and utilized generation capacity, he added. Acting FPCCI Chief apprised that PKR. 2 trillion capacity payments to 40 companies are paralyzing the national economy; and, IPPs continue to receive payments in the name of capacity charges even in the instances when there is no electricity is generated or supplied. Capacity charges constitute two-thirds of the total cost of electricity; while fuel costs comprise of only one-third. Magoon maintained that studies reveal that IPPs have been enjoying returns exceeding 73 percent in dollar terms; which is unusually high and predatory when compared to international standards and practices. Pakistan’s energy sector has been trapped in problematic contractual arrangements in perpetuity with IPPs since the 1994 Power Policy. These contracts have led to escalating circular debt to PKR. 2.64 trillion in February 2024, he added. Saquib Fayyaz Magoon elaborated that guarantees indexed to the US dollar mean any depreciation of the Pakistani rupee increases returns for IPPs – adding debilitating financial burden on the government and the public alike.