ISLAMABAD: The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has moved the Supreme Court of Pakistan for a forensic audit of independent power producers (IPPs), amid a worsening cost-of-living crisis in the South Asian country.
The development comes amid protests in Rawalpindi and Karachi by thousands of supporters of the Jamaat-e-Islami (JI) religio-political party, who have been calling for a review of Pakistan’s loss-making agreements with IPPs, reduction in power tariffs, revocation of additional taxes introduced in the last budget and other similar measures.
Pakistan has the highest electricity tariffs in the region and the government is currently on track to pay Rs2.1 trillion to the IPPs in capacity payments this fiscal year, while circular debt for the energy sector in 2024 reached Rs. 5.422 trillion. At the same time, numerous IPPs are being paid billions despite not producing any electricity.
All IPP contracts for the sale of electricity are structured in two tiers. First, the power purchaser is required to make “capacity payments,” which are required to cover all fixed costs of the IPPs, including debt repayments as well as Operations and Management costs (O&M Costs) and return on equity (RoE) at a stipulated rate, according to the FPCCI.
These capacity payments are to be made by the power purchaser whether or not any electricity is actually purchased. In addition to capacity payments, there is a variable cost attributable to the production of energy above a certain plant capacity factor (normally 60 percent). In other words, if more than 60 percent of a plant’s capacity is utilized for electricity generation, then the relevant IPP is entitled to additional payments. Fuel cost is treated as a pass-through item.
“In the light of the foregoing, it is respectfully prayed that this Honourable Court may be graciously pleased to direct the Government of Pakistan to commission a detailed and thorough forensic audit of all IPPs,” the FPCCI prayed in its petition, urging for the recovery of excess profits earned by IPPs, renegotiating all IPP agreements, and removing anomalies regarding the calculation of Internal Rate of Returns (IRR) on equity investments in all IPP agreements.
The FPCCI referred to a 288-page report by Committee for Power Sector Audit, Circular Debt Resolution and Future Roadmap from 2020, which it said identified more than Rs100 billion worth of excess payments made to IPPs and recommended a number of steps to identify power sector problems, including conducting a forensic audit and the recovery of prior excess payments.
“Till date, no such audit has been conducted nor have any prior excess payments been recovered. More importantly, there is no public explanation for why the 2020 Report remains unimplemented,” it noted. “Pakistan’s power sector is a thus a paradigmatic example of regulatory capture, where year after year the people of Pakistan continue to suffer at the hands of predatory elites.”
The FPCCI said the current situation was not only placing an “unbearable burden” on domestic consumers, but it was also forcing industries to either go off-grid or shut down, while the government was trying to recover higher and higher tariffs from a smaller and smaller pool of customers.
One of the main reasons for Pakistan’s perennial economic crisis is its electricity sector. Pakistan is on track this year to pay approximately Rs3.58 trillion in payments to electricity generating companies. Out of this total amount, approximately Rs2.63 trillion is likely to be recovered, while the remainder will be subsidised by the government. This unrecovered amount will be added to already existing circular debt of Rs5.422 trillion, according to the petition.
Currently, Pakistan has installed generation capacity of 45,885MW. Out of this, 23,860MW (52 percent) has been installed by state-owned entities (both federal and provincial), while the remaining capacity of 22,043MW (48 percent) has been installed by IPPs. It is important to note that as against its installed generation capacity of 45,885MW, the maximum power demand during the summers is around 30,000MW while winter peak loads are closer to 12,000MW.
Notwithstanding this current oversupply of electricity, IPPs are scheduled to add another 7,460MW of electricity by 2032. This capacity is in addition to the 11,550MW due to be added through the government’s own projects (4,320MW Dasu Hydroelectric Project due for completion in 2026, 4,500MW Diamer-Basha Hydroelectric Project due in 2029, 1,530MW Tarbela 5 extension due in 2026, and 1,200 MW Chashma 5 nuclear plant due for completion in 2031.
“It is estimated that during the current financial year (i.e. 2024 – 2025), capacity payments will total Rs2.1 trillion (equal to about 1.9 percent of GDP). In FY 2023-24, 45 percent of capacity payments were made to the government-owned plants, 15 percent to private parties (mostly local) and 40 percent to IPPs set up under CPEC (China-Pakistan Economic Corridor),” the FPCCI said.
“Notwithstanding the trillions being paid as capacity charges to the IPPs, actual capacity utilization of the IPPs is very low. In some cases, IPPs are getting paid billions in capacity charges without generating a single unit.”
It said it was also important to note the exponential manner in which such charges had increased.
“In 2015, an average of 13,000MW electricity was being consumed with capacity charges of Rs200 bn (against an installed capacity of about 20,000 MW). Today, consumption still averages around 13,000MW but capacity charges have increased by more than 1000 percent to Rs2.1 tr (against an installed capacity of about 45,885 MW),” the FPCCI added.
Pakistani industrialists move top court for forensic audit of independent power producers
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Pakistani industrialists move top court for forensic audit of independent power producers
- The development comes amid protests in Rawalpindi, Karachi for reduction in power tariffs and review of Pakistan’s loss-making agreements with IPPs
- Pakistan has highest tariffs in the region and the government is currently on track to pay Rs2.1 trillion to IPPs in capacity payments this fiscal year
Pakistan Chairman Joint Chiefs of Staff: China corridor is ‘stabilizing force’ for South Asia
- General Sahir Shamshad Mirza emphasizes Pakistan’s strategic bond with China at a major Beijing forum
- He hails CPEC as a game-changing initiative to ensure greater regional connectivity and economic growth
ISLAMABAD: Chairman Joint Chiefs of Staff Committee General Sahir Shamshad Mirza said on Friday the China-Pakistan Economic Corridor (CPEC) was not just beneficial for his country’s economy but also a “stabilizing force” for South Asia.
CPEC is a massive infrastructure and economic development initiative that was launched in 2015 as part of China’s Belt and Road Initiative (BRI). It aims to enhance connectivity between the two states through a network of roads, railways, energy projects, and special economic zones.
The primary goal of CPEC is to improve Pakistan’s infrastructure, boost trade, and create jobs while providing China with direct access to the Arabian Sea via Pakistan’s Gwadar Port.
It is widely viewed as a strategic partnership between the two countries that has the potential to reshape the region’s economic geography.
“Our relations with [the] People’s Republic of China are truly special and time-tested relationship that not only serves as a testament to our all-weather strategic cooperative partnership but also as a cornerstone for peace and stability, both for Pakistan and the region that are today fraught with challenges,” Mirza said while addressing the Security Cooperation and Asia-Pacific Prosperity and Stability Session of the 11th Beijing Xiangshan Forum in China.
“Ladies and gentlemen, [the] China-Pakistan Economic Corridor is a flagship project of China’s Belt and Road Initiative,” he continued. “It is an initiative of enhanced regional connectivity and economic development. Indeed, CPEC is not only a game changer for Pakistan’s economy, but also a stabilizing force in South Asia.”
The 11th Beijing Xiangshan Forum is being held from September 12 to 14, with unprecedented participation from over 100 countries and organizations. Under the theme of “Promoting Peace for a Shared Future,” this year’s event features critical discussions on global security, regional stability, and innovative technologies in defense.
The Pakistan government is already negotiating “CPEC 2.0” to mark the second phase of the joint corridor project carried out by the two countries, shifting the focus from infrastructure and energy projects to industrial cooperation, agriculture, socio-economic development and technological advancements.
CPEC 2.0 also aims to develop new Special Economic Zones (SEZs) to attract foreign investment and boost industrial growth, as part of Pakistan’s economic revitalization strategy.
– With input from China News Service via Reuters
Pakistan launches probe into ex-PM Khan’s ‘threatening’ social media post targeting state institutions
- Khan criticized powerful people, saying they were putting the country’s stability at stake to maintain power
- Information minister say FIA is investigating who is operating Khan’s social media account and from where
ISLAMABAD: The government has directed the Federal Investigation Agency (FIA) to investigate a “threatening” social media post by former Prime Minister Imran Khan in which he criticized Pakistan’s military and judiciary, Information Minister Attaullah Tarar announced on Friday, adding a team of interrogators was currently questioning him in prison.
Since the collapse of his government in a parliamentary no-confidence vote in April 2022, Khan has repeatedly alleged that his ouster was orchestrated by US officials in Washington with the complicity of Pakistan’s military, accusations that both the US and Pakistani authorities have denied.
Khan, who has been imprisoned for over a year on multiple charges, has continuously criticized Pakistan’s military and intelligence services, accusing them of involvement in a failed assassination attempt on him during a protest in November 2022.
In a recent social media post, he likened the current military leadership to General Yahya Khan, accusing them of risking the country’s stability to maintain power. He also named Chief Justice of Pakistan Qazi Faez Isa among the powerful individuals who he said were upholding the “system of injustice and brutality” against his Pakistan Tehreek-e-Insaf (PTI) party.
“The FIA is investigating the matter of the threatening post by PTI’s founding chairman,” the information minister said in a statement.
“The founding chairman of PTI shared an anti-state post on social media and posted material against Pakistan’s integrity,” he continued, adding he had targeted the institutions of military and judiciary.
The minister said that an FIA team had arrived at Adiala Jail to determine who was operating Khan’s social media account and from where.
Tarrar did not elaborate on why he considered the ex-premier’s lengthy post threatening, though it urged Pakistanis to “come out for a street movement to protect our freedom.”
Khan’s legal spokesperson, Naeem Haider Panjutha, also confirmed that a “four-member team” from the FIA’s Cyber Crime Wing had gone to the prison to interrogate the former prime minister while condemning the development.
Dhaka’s National Press Club marks 76th death anniversary of Pakistan’s founder
- Participants say Bangladesh would have been treated like Kashmir if it had not been part of Pakistan in 1947
- They emphasize the need for closer relations with Pakistan and China, asking their country to honor MA Jinnah
ISLAMABAD: In a significant development, the National Press Club in Dhaka arranged an event in remembrance of Pakistan’s founding father, Muhammad Ali Jinnah, to mark his 76th death anniversary with Urdu songs, poetry, and recitals this week, according to a report published by a Bangladeshi newspaper on Thursday.
The tribute to Jinnah comes at a time of profound political change in Bangladesh, where just weeks ago, a student-led protest toppled Prime Minister Sheikh Hasina Wajid’s government, marking the end of her 15-year rule.
The unrest led to the toppling of statues of Sheikh Mujibur Rahman, the nation’s founding father and Wajid’s father, amidst widespread dissatisfaction with his daughter’s increasingly autocratic governance.
The event in remembrance of Pakistan’s founding leader is particularly striking, given Bangladesh’s historical resentment toward Pakistan over the events of the 1971 independence war, signaling a re-evaluation of the country’s political and historical narratives, driven by a turbulent domestic environment and evolving sentiments toward its neighbors.
“If Bangladesh had not been part of Pakistan in 1947, we would have been in the same position as Kashmir today, with the Indian junta holding weapons to our necks,” one of the speakers identified as Muhammad Samsuddin was quoted as saying by Dhaka Tribune. “Bangladesh gained independence because of Pakistan, which Jinnah helped create.”
“Why should we change the name of Allama Iqbal Hall or Jinnah Avenue,” he asked. “These changes were made because [New] Delhi wanted them, but we did not. Bangladesh must foster strong relations with China and Pakistan.”
Another speaker, Nazrul Islam, said Bangladesh should continue to have good relations with Pakistan.
“If Jinnah had not been there, Pakistan would not have existed, and without Pakistan, Bangladesh would not exist,” he continued. “Jinnah is the father of our nation, but we do not acknowledge it.”
“We must preserve our brotherhood, and I hope that both Jinnah’s birth and death anniversaries will continue to be observed here every year,” he added.
The Bangladeshi newspaper informed the Pakistani high commissioner was invited to the event, though he could not attend the ceremony and sent his deputy.
Two Pakistani students studying in Bangladesh were present at the gathering and performed Urdu songs dedicated to their country’s founding father.
Pakistan’s army chief vows support to police amid rising militant attacks in Khyber Pakhtunkhwa
- Militant factions have relentlessly targeted the cops in the province, leading to police protests in KP
- General Munir vows to maintain ‘the hard-earned peace’ during his visit to the Orakzai tribal district
ISLAMABAD: Chief of Army Staff General Asim Munir praised the police and other law enforcement agencies (LEAs) in Pakistan’s northwestern Khyber Pakhtunkhwa (KPK) province during a visit to the Orakzai tribal district on Friday, vowing to provide all possible support to them in performing their duties.
The army chief’s visit comes at a time when militant factions operating in the area have relentlessly targeted the police, killing over 75 of them since the beginning of the year, leading to protests by law enforcement personnel in various parts of the province against these killings.
Security in the region has mostly been dominated by the army, which has been fighting proscribed militant factions like Al Qaeda and the Pakistani Taliban for about two decades, with the police seeking greater government support to empower them to deal with extremist violence in the area.
The military’s media wing, Inter-Services Public Relations (ISPR), informed General Munir received a briefing on the security situation in the area along with the ongoing intelligence-based counterterrorism operations that have been undertaken to ensure stability in the restive tribal district.
“Pak Army will continue to provide all out support to KPK Police and other LEAs in enabling them to perform their duties in newly merged districts,” the army chief said, referring to the tribal areas bordering Afghanistan that were integrated into Khyber Pakhtunkhwa nearly six years ago.
He paid tribute to all the uniformed personnel of the police and security forces who had laid down their lives while performing their duties, saying “the hard-earned peace” achieved through their sacrifices would be maintained at all costs.
The army chief also appreciated the support of the local population in assisting the security forces with their efforts, noting that their positive role was essential in sustaining peace in the region.
Earlier, General Munir laid a floral wreath at the Martyrs’ Memorial and interacted with troops in Orakzai who had participated in recent counterterrorism operations in the area.
Pakistan stocks rally after policy rate cut, positive developments on IMF front
- The benchmark KSE-100 index rose by more than 800 on Friday morning
- It declined in the afternoon session to close at 79,333, up by 315 points
ISLAMABAD: The Pakistan Stock Exchange (PSX) on Friday rallied by more than 300 points, according to the PSX website, following a policy rate cut by the central bank and positive developments with regard to the country’s International Monetary Fund (IMF) bailout.
The benchmark KSE-100 index rose by more than 800 on Friday morning, but declined in the afternoon trading session to close at 79,333, up by 315 points.
A day earlier, the central bank cut its key policy rate by 200 basis points to 17.5 percent — the third straight reduction since June as the country looks to spur growth as inflation eases.
“The MPC assessed the real interest rate to still be adequately positive to bring inflation down to the medium-term target of 5–7 percent and help ensure macroeconomic stability,” the State Bank of Pakistan’s Monetary Policy Committee said in a statement, announcing the cut.
“This would be essential to achieve sustainable economic growth over the medium term.”
Separately, the IMF said its board would meet at the end of this month to discuss Pakistan’s new $7 billion bailout program that was agreed in July.
“All matters with the IMF have been settled amicably,” Finance Minister Muhammad Aurangzeb said in a statement on Thursday. “These matters will be finalized in the meeting of the IMF board this month.”
Pakistan’s sovereign dollar bonds also rallied on Thursday, with the 2031 maturity trading 1 cent higher to bid at 79.93 cents on the dollar, according to Tradeweb data.
