Capacity payment agreements with IPPs: Govt could face severe business disruptions: UBG

KARACHI: Central President of the United Business Group, Zubair Tufail, has warned the government that if the Capacity Payment Agreements with Independent Power Producers (IPPs) are not reviewed, Pakistan could face severe business disruptions and industrial closures, which are already becoming evident.

Zubair Tufail stated that this could lead to economic decline and threaten the country’s exports.

He emphasized that due to the IPP agreements, Pakistan has become one of the most expensive countries in the region for electricity, and the cost of production is increasing. Because of high production costs, buyers in the global market are starting to overlook Pakistani exporters, leading to the potential cancellation of export contracts.

The President of the United Business Group criticized previous governments for their poor planning and said that the agreements made with power plants have become a major headache for the entire system.

He stressed that Capacity Payment Agreements with IPPs are a significant cause of the economic crisis in the country. Zubair Tufail pointed out that whether or not electricity is purchased, its cost must be paid, and payments are required in dollars. Despite the fact that only 47.9% of the electricity produced by IPPs is utilized, 100% of the payments are being made to them. The devaluation of the rupee has further complicated the issue.

He also noted that instead of promoting alternative energy sources like wind power, our national system discourages their use while continuing to make Capacity Payments to these power plants.

He said that the government’s incompetence and poor planning, coupled with these agreements, are putting the burden on the public. Officials of the Power Division also cite Capacity Payment Agreements with IPPs as the primary reason for the high electricity prices.

Zubair Tufail warned that if these agreements are not reviewed, consumers will end up paying billions of rupees annually for electricity they do not use.

He said that business leaders Gohar Ejaz and SM Tanveer have made it clear that recent increases in electricity prices will neither reduce the circular debt nor improve the electricity system. The billions of rupees collected from consumers will be used for Capacity Payments to power plants, which will continue to sink the country’s economy into a quagmire.

Therefore, we demand that the government immediately review the agreements made with IPPs in consultation with representatives of the business community across the country.

Copyright Business Recorder, 2024