KARACHI: A group of prominent businessmen this week urged the government to review contracts with independent power producers, in the wake of a crisis over record electricity prices that has fueled nationwide protests and traders strikes since last month.
IPPs are private, non-utility generator companies that produce electricity and sell it to the government and end users. Among major criticisms of IPP contracts is that they require the government to make capacity payments even when power generated by them is not fully utilized. Experts say the arrangement leads to a high cost of electricity which augments the production costs of factories and industrial units. IPPs have also been accused of making exorbitant profits and dividends on capital invested under existing contracts.
Speaking to reporters earlier this week, Caretaker Prime Minister Anwaar-ul-Haq Kakar acknowledged problems with IPP contracts when questioned about record electricity bills that have led to nationwide protests. He said the government was “thoroughly discussing” renegotiating the contracts among the various options it was considering in response to the unrest.
“We request the government not to revise the agreements with the IPPs on old terms,” Mirza Akhtar Baig of the United Business Group said at a news conference in Karachi on Wednesday. “We should not renew contracts with them on old terms.”
Baig said under the contracts, the government had been paying capacity surcharges to IPP companies, which he said even exceeded the country’s defense budget.
Representatives from the Power Division told Senate last week capacity payments to IPPs for the current fiscal year had reached a staggering Rs1.3 trillion. Over the years, IPPs have also been accused of over invoicing and misreporting, and experts and politicians have called for a heat rate audit.
At Wednesday’s press conference, the business group also requested the government to put the names of all domestic and foreign IPPs owners on the exit control list to probe irregularities in the power generation sector.
“At present, Pakistani industries are facing problems due to our declining national economy,” Khalid Tawab, another influential businessman at the press conference, said. “Traders and industrialists are all worried because of the electricity bills. Forty percent of industries have been closed in Pakistan.”
Kakar’s government has also announced it is trying to bring down electricity tariffs, and blamed electricity theft for the revenue shortfall of Rs589 billion ($1.9 billion) in the power sector annually.
Interim energy minister, Muhammad Ali, said this week the government was setting up a task force to crackdown against those stealing electricity or not paying bills on time.
An electricity price hike was agreed with the IMF earlier this year when the international lender approved a short-term $3 billion bailout package for Pakistan.
Pakistani businesses demand new contracts with independent power producers amid electricity bills crisis
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Pakistani businesses demand new contracts with independent power producers amid electricity bills crisis
- PM Kakar this week acknowledged problems with IPP contracts, said “thoroughly discussing” renegotiating
- Pakistan has been in the grips of sporadic protests and strikes since last month over record electricity bills
Pakistan highlights Gwadar transshipment role as shipping routes face disruption over regional tensions
- Pakistani ports possess “untapped potential” to attract global shipping lines for transshipment operations, says minister
- Pakistan eyes leveraging Gwadar as regional transshipment hub as Iran’s closure of Strait of Hormuz disrupts global maritime trade
KARACHI: Pakistan’s Maritime Affairs Minister Junaid Anwar Chaudhry on Thursday highlighted the importance of the port city of Gwadar’s transshipment role as major shipping routes, including the Strait of Hormuz, face disruption due to Iran’s ongoing conflict with the US and Israel in the Gulf.
The meeting takes place as Iran has effectively closed the Strait of Hormuz, a strategic waterway that lies between it and Oman. It is one of the world’s most critical oil transit routes, with roughly 20 percent of global oil supplies passing through it. Iran has vowed it will attack any ship that enters the strait, causing energy prices to rise sharply on Monday amid disruptions to tanker traffic in the waterway.
Gwadar is a deep-sea port in Pakistan’s southwestern Balochistan province that lies close to the Strait of Hormuz. Pakistani officials have in the past highlighted Gwadar’s geostrategic position as the shortest trade route to the Gulf and Central Asia, stressing that it has the potential to become a regional transshipment hub.
Chaudhry chaired a high-level meeting of government officials to assess emerging logistical challenges facing Pakistan’s trade, particularly in the energy sector, amid tensions in the Gulf.
“Special focus was placed on fully leveraging the potential of Gwadar Port as a regional transshipment hub and positioning it as an alternative of regional instability,” Pakistan’s maritime affairs ministry said in a statement.
The minister said Pakistani ports possessed “significant untapped potential” to attract international shipping lines for transshipment operations, noting that it could also ensure long-term sustainability and growth of the country’s maritime sector.
Participants of the meeting discussed measures to strengthen Pakistan’s position as a viable alternative transit and transshipment destination, as key waterways are affected by the disruption.
The committee also reviewed proposals to amend relevant rules and regulations to facilitate international transshipment operations through on-dock and off-dock terminals.
The chairmen of the Port Qasim Authority, Karachi Port Trust and Gwadar Port Authority attended the meeting, briefing committee members on the current operational readiness of their ports. They spoke about the available capacity for container transshipment, bulk cargo handling and refueling services at Pakistani ports.
The port in Gwadar is a central part of the China-Pakistan Economic Corridor (CPEC), under which Beijing has funneled tens of billions of dollars into massive transport, energy and infrastructure projects in Pakistan.
Pakistan has long eyed the deep-sea port as a key asset that can help boost its trade with Central Asian states, the Gulf region and ensure the country earns valuable foreign exchange.
