Ahmed Khan Malik

The agreements signed by the government with the independent power producers (IPPs) have drawn fire from the Karachi-based industries leading to their closure one after another. Tufail Masood, Chairman of the Karachi Business Panel, told WealthPK that the main transmission line was receiving only 22,000MW electricity as against the capacity of 45,000MW but the consumers had to pay for the unused electricity. We have to pay 56 percent of the cost in capacity charges due to the unfair contracts with the IPPs, he said. The government must decide whether it wants to save 40 people or 240 million Pakistanis, he asked. The industry is unable to keep the factories running at this rate of electricity. Revision of electricity rates is an urgent matter and the government should take immediate steps to resolve this issue; otherwise, the industry once shut down could not be revived, he said. “The business community is committed to helping the country and the government achieve long-term growth and bring in $100 billion by the end of 2030, but it needs to address issues like electricity tariffs to reduce the production costs so that our industry can compete.”

Tufail further questioned the rationale for paying capacity charges to the government power plants and called for their forensic audit. He pointed out that the government's debt to local banks has reached Rs50 trillion, with Rs30 trillion deposited in current accounts. Banks pay 10 percent interest on deposits but charge 22 percent interest when lending to the government, creating an unsustainable financial burden. President of the SMEs Association Karachi Mustafa Hussain urged the government to set the electricity prices at Rs25 per unit. He argued that lower interest rates and cheaper electricity would boost industries and drive national development. High interest rates, he observed, encourage people to deposit money in banks rather than invest or start businesses. With Rs30 trillion in bank deposits at 10 percent interest rate, the banks profit by lending to the government at 22 percent. In the Financial Year 2023-24, it was apprehended that the power distribution companies (Discos) may suffer a loss of Rs589 billion, including under the head of recovery and the losses beyond the threshold set by the National Electric Power Regulatory Authority (Nepra), he added. He urged the federal government to include revising the power contracts with the IPPs in the draft of 26th constitutional amendment before tabling it in the parliament to save the country’s sinking industry.

Credit: INP-WealthPk