President Federation of Pakistan Chamber of Commerce and Industry Atif Ikram Sheikh has said that the federal government should cancel all contracts with IPPs and procure electricity from cheaper sources without capacity charges.
The recent increase in electricity rates may lead to civil unrest and discontent in the business community.
The federal government should formulate a strategy to deal with IPPs and ensure affordable electricity prices for industries in the national interest, he expressed these views while talking to Chairman Capital Office Karim Aziz Malik, Vice President Tariq Jadoon, Vice President Qurat ul Ain, Mian Akram Farid, Coordinator Diplomatic Committee Muhammad Ahmed, Chairman Coordination Malik Sohail Hussain and others.
Federation President Atif Ikram said that Pakistan’s energy sector has been trapped in contract issues with IPPs since 1994. Exorbitant electricity prices have led to large-scale industrial shutdowns and job losses. The payment of Rs. 2 trillion to 40 companies is economically crippling. IPPs receive payments even when power is not generated or supplied.
Atif Ikram Shaikh said that these agreements led to an increase in revolving credit, which reached Rs 2.64 trillion as of February this year.
The initial return on equity for IPPs was set at 18 percent and was later reduced to 12 percent but is still high compared to global standards. Research shows that IPPs are enjoying more than 73% returns in dollar terms which is unusually high compared to international standards.
Re-evaluation of IPP contracts and pricing, and better monitoring to prevent over-invoicing are required, he added.
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