Key Takeaways:
– Industry leaders urge government to lower electricity tariffs to 9 cents per unit for industrial sustainability.
– They propose a forensic audit and cancellation of unnecessary contracts with independent power producers (IPPs).
– High capacity payments to IPPs are seen as a significant economic burden.
Industrial Leaders Demand Lower Electricity Tariffs
The Korangi Association of Trade and Industry (KATI) President, Johar Ali Qandhari, alongside other industry leaders, has called on the government to reassess power purchase agreements with independent power producers (IPPs). They emphasize the urgent need to reduce the electricity tariff to 9 cents per unit to ensure the survival of industries.
Criticism of High Capacity Payments
During a press conference at the KATI office, Qandhari pointed out that the payments to IPPs surpass the nation’s defense budget, questioning whether the interests of the few families running these IPPs should outweigh the needs of Pakistan’s 240 million citizens. He urged the government to conduct a forensic audit of the IPPs’ financials and consider canceling contracts with unnecessary private entities.
Utilization and Costs of Electricity
Pakistan has an installed electricity production capacity of 45,000 megawatts, yet only 22,000 megawatts are currently being utilized. The cost of electricity for industrial consumers stands at Rs35 per unit before tax and Rs60 after tax. Qandhari noted that Rs18 per unit is allocated to capacity charges for unused electricity, significantly straining the economy. He highlighted that Rs2,000 billion would be paid in capacity charges, exacerbating economic pressures.
Proposed Reforms
Qandhari suggested revising the capacity conditions for government-owned IPPs, which hold 45% of the market, by reducing management costs and shifting from the London Interbank Offered Rate (Libor) to the Karachi Interbank Offered Rate (Kibor). For privately owned IPPs, which comprise 25% of the market, he recommended renegotiating contracts to transition from “Take or Pay” to “Take and Pay” agreements.
Advocacy for a Competitive Electricity Market
KATI’s president advocated for the establishment of a competitive electricity market in Pakistan, proposing that the government withdraw from electricity production and purchasing. This would allow private companies to take over, fostering competition and enabling consumers to choose their electricity providers based on better terms and lower rates.
Call for Government Action
Federal Minister for Energy Sardar Awais Laghari was urged to scrutinize IPP contracts and make them public, in addition to conducting financial audits by international firms. Syed Raza Hussain, President of FB Area Association of Trade and Industry, called for decisive government action to either terminate or renegotiate agreements with IPPs to ensure fair and sustainable tariffs. Khalid Tawab, Chairman of United Business Group (Sindh Zone), emphasized the need for revisiting IPP agreements and reducing electricity tariffs to support the survival of industries and exporters.
Also Read: Pakistan’s IT Exports Surge to $3.2 Billion in FY24
Conclusion
The industrial leaders stressed that the current high power tariffs due to IPPs are jeopardizing the future of Pakistan’s industries and causing significant hardship for the population. They appealed to the government to take swift action to address these issues for the betterment of the country’s economic landscape.
