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 to sell excess gas in international markets from Jan.1— petroleum minister
- Pakistan was reportedly exploring ways to reduce $378 million in annual losses from supply glut caused by excess fuel imports
- Move to sell excess LNG in international markets will limit $3.56 billion losses caused since 2018-19, says petroleum minister
ISLAMABAD: Pakistan will sell its excess liquefied natural gas (LNG) in international markets from Jan. 1, Petroleum Minister Ali Pervaiz Malik said, revealing the move would limit losses caused from a years-long supply gut.
Local and international media outlets had reported in July that Pakistan was exploring ways to sell excess LNG cargoes amid a gas supply glut that government officials said was costing domestic producers $378 million in annual losses. News reports had said Pakistan had at least three LNG cargoes in excess that it imported from Qatar and has no immediate use for.
Speaking to reporters during a press conference on Sunday, Malik said there was an excess of imported gas in Pakistan as the use of this fuel for power generation had reduced in the country during the past few months. He said Islamabad had been forced to sell the gas to local consumers, due to which the circular debt in the gas sector from 2018 till now had ballooned to around Rs1,000 billion [$3.56 billion].
“From Jan. 1 we will sell this excess fuel in international markets to reduce our burden and limit our losses of this Rs1,000 billion [$3.56 billion],” Malik said.
He said this move would also allow Pakistan’s state-owned enterprises in the sector to operate on their full capacity and generate profits and employment.
Malik also spoke of foreign oil companies that were ready to invest millions in the country in the near future.
The minister cited the recent visit of Turkish energy minister to Pakistan which had resulted in the state-owned Turkish Petroleum signing deals to carry out onshore and offshore drilling activities in Pakistan.
“Turkish Petroleum will also open its office in Islamabad, where 10 to 15 Turkish nationals will be working,” Malik said.
He also said that a delegation of the State Oil Company of Azerbaijan Republic (SOCAR) visit Pakistan this week, adding that it was also expected to collaborate with local companies for oil and gas exploration.
The minister said SOCAR was also opening its office in Pakistan.
“It will also invest millions of dollars in the construction of an oil pipeline from Machike to Thalian in collaboration with the PSO (Pakistan State Oil) and FWO (Frontier Works Organization),” Malik said.
