United Business Group (UBG) Patron-in-Chief SM Tanveer Wednesday urged the federal government to review all agreements with the Independent Power Producers (IPPs) and start procuring electricity from cheaper sources without any capacity charges. In a media statement issued here, he expressed concerns over closure of various industrial units due to high electricity tariffs, saying that he was looking at job losses across the country as a direct result. Tanveer argued that outstanding capacity payments to the IPPs had affected the country’s economic activities badly, urging the government to take decisive action in this regard. He mentioned that previous investigations revealed that the IPPs had been enjoying a return on investment exceeding 73 per cent in dollar terms, a unusually high rate compared to international standards.

The contracts with the IPPs, initially signed to alleviate the energy crisis by attracting private investment, had instead led to an escalating circular debt, he added. Although the return on equity for IPPs was initially set at 18pc and later reduced to 12pc in the Power Policy of 2002, it remains higher compared to the global norms. Additionally, cost comparisons with similar projects in other countries suggest that many IPPs were funded through inflated invoicing on capital goods, resulting in no real underlying equity. Consequently, Pakistan is burdened with perpetual returns on ghost equity, the UBG chief said. He called for a comprehensive review of the IPP agreements, price re-evaluation within legal bounds, and improved oversight to prevent over-invoicing. He also stressed the importance of examining the energy infrastructure for clauses related to misinformation and fraud.

Credit: Independent News Pakistan