The govt-owned IPPs

The country’s installed power generation capacity stands at 45,885 megawatts, with a notable divide between public and private-sector ownership. Government entities, encompassing both federal and provincial bodies, control a 52% stake, translating to 23,860 megawatts.

Meanwhile, Independent Power Producers (IPPs) in the private sector own a significant 48% share, accounting for 22,043 megawatts of the total capacity.

A striking disparity exists between Pakistan’s installed power generation capacity and its actual demand. Despite having a capacity of 45,885 megawatts, the country’s peak electricity demand during summer months barely touches 30,000 megawatts.

Conversely, this number dwindles to a mere 12,000 megawatts during the winter season. This significant gap raises questions about the efficiency of Pakistan’s power infrastructure and the reasons behind this stark contrast between capacity and consumption.

Despite having an excess supply of electricity, the situation is exacerbated by the fact that IPPs plan to add another 7,460 megawatts of power plants by 2032, in addition to the government of Pakistan’s own projects totalling 11,550 megawatts.

These projects include the 4,320 megawatt Dasu Hydroelectric Project (expected completion 2026), the 4,500 megawatt Diamer-Bhasha Hydroelectric Project (expected completion 2029), the 1,530 megawatt expansion of Tarbela 5 (expected completion 2026), and the 1,200 megawatt Chashma 5 Nuclear Plant (expected completion 2031). This raises concerns about the country’s energy planning and the potential for further power surplus.

It is an undeniable fact that the government bears the dual responsibility of providing electricity and ensuring its availability at reasonable rates. However, the current state of affairs raises questions about the government’s commitment to this principle.

Rather than prioritizing undue profits, the government must recognize its obligation to provide basic amenities at affordable prices. By allowing private companies to reap excessive profits, the government is, in effect, shirking its responsibilities. The age-old adage holds true: what cannot be done directly, cannot be done indirectly either.

For nearly three decades, Pakistan’s power sector has been plagued by unchecked profiteering. Successive governments have connived with private companies, allowing them to reap windfall profits at the expense of the state. Meanwhile, the ordinary citizen bears the brunt of this greed, shouldering the burden of exorbitant electricity bills. The so-called ‘capacity charges’ are nothing but a euphemism for extortionate profits.

A glaring flaw in Pakistan’s power policies has come to light, exposing a dangerous trend of government-backed loans to private companies. By providing sovereign guarantees, Islamabad has essentially put taxpayers on the hook for repaying these loans, with the government forced to borrow at exorbitant interest rates. This risky move has crippling consequences for the nation’s finances, sparking concerns about the government’s ability to manage the country’s debt burden.

The government’s handling of the power sector has been a recipe for disaster. By granting excessive profits to private companies and government-owned projects alike, the government has created a culture of greed. Furthermore, the imposition of unjustified taxes on electricity consumers has added insult to injury. The government’s actions are a clear betrayal of public trust, and it is time for accountability.

The government’s decision to drastically increase taxes on electricity bills is a cruel blow to the nation’s consumers. With household bills rising by 24%, commercial bills by 37%, and industrial bills by 27%, the burden on already-struggling Pakistanis has become unbearable. This taxation tsunami demands immediate attention and reform, lest the government risks alienating its citizens and exacerbating the economic crisis.

Pakistan’s electricity consumers are being held hostage by a complex web of taxes, making it difficult for them to afford this basic necessity. The government’s decision to impose multiple taxes - including Additional Tax, Further Tax, Sales Tax, and Advance Income Tax - has resulted in a hefty burden on consumers.

A startling revelation has emerged in Pakistan’s power sector, where government-owned Independent Power Producers (IPPs) are raking in profits identical to those of private IPPs. This raises fundamental questions about the government’s role in perpetuating a system that benefits itself, while leaving consumers to bear the brunt of exorbitant capacity charges.

It’s logical for private power plants to demand a premium to mitigate the risk of government contract breaches. However, it’s unfathomable that a government would agree to pay such a premium to power plants under its own control. This blatant self-interest raises alarming concerns about the government’s stewardship of public finances and the power sector.

A stunning exposé has revealed that the government’s power sector agreements have created a financial quagmire, with state-controlled power plants benefiting from lucrative deals that echo those with private producers by permitting government-owned IPPs to take profits in US dollar on equity, despite rupee-denominated investments. A shocking reality has come to light: the government-owned power plants are raking in exorbitant profits, mirroring the excessive returns of private IPPs.

Even if private operators’ demands for high returns are justified, it’s illogical to expect Pakistani consumers to bear the same burden for state-controlled plants. These government-owned entities are guaranteed contracts that siphon off ‘returns on equity’ from citizens’ pockets while also reaping unreasonable profits.

Furthermore, the debt service charges paid to these plants in dollars far exceed the actual loan servicing costs, raising questions about the government’s handling of the power sector.

The issue at hand is not about prohibiting government-owned power plants from generating profits altogether. Instead, the contention is that such profits should only be permissible in a market characterized by unfettered competition, ensuring a level playing field for all stakeholders. The move to force consumers to buy electricity from state-owned companies raises serious questions about the government’s commitment to upholding constitutional guarantees.

By leveraging its position to profit from a basic necessity like electricity, the government is essentially denying citizens their fundamental right to access this essential service. This blatant exploitation must be addressed to ensure that the government serves the people, not just its own interests. In any case, any additional amount collected beyond what is due is tantamount to an illegal tax.

Facts also reveal that government-owned power plants are not above fudging their accounts for personal gain. A damning report by the Auditor General of Pakistan has unearthed a staggering Rs 19.5 billion in unjustified claims made by the Central Power Generation Company Limited (CPGCL).

The company failed to disclose critical information, including the shutdown of a power unit for 16 months while the burning of another.

Besides increasing electricity charges on par with IPPs for government projects, the government also imposes additional taxes on consumers’ electricity bills.

The United Business Group has approached the Supreme Court through the FPCCI platform against IPPs and hopes that the Supreme Court will ensure that the government of Pakistan and the IPPs under its control do not reap huge profits from the people in the name of capacity charges.

In a bid to bring transparency and accountability, a thorough and detailed forensic audit of all Independent Power Producers (IPPs) is imperative. Furthermore, the implementation of the 2020 report will help liberate the public from the stranglehold of IPPs, ensuring a fair and just deal for all.

Copyright Business Recorder, 2024