IPPs and government agreed to provide relief

Independent power producers (IPPs) and the government are finally agreed to review their contracts and give relief to end consumers. The government formed a nine-member committee to determine the malpractices, corruption, the line losses, and all the issues with IPPs.

The committee probe more than 60 power-plants, which singed in their contracts in 1994 and 2002.  The committee also suggested a forensic audit of the different power plants.

The found the biggest issue in the contracts was payment in dollars and capacity charges. Now capacity charges mean if a power plant produces 100MW and the government needs 70MW, but the government has to pay for 100MW. Because it is mention in the contracts, the government has to bear capacity charges.

The second issue which is causing Pakistan’s reserves depleting is circular debt. The circular debt is increasing day by day. When Imran Khan came into power, the circular debt was RS-1100bn. Now it is 2200bn.

 The government is buying expansive electricity and selling it at a low cost because the government is buying electricity in Dollars and selling it in Rupees, causing circular debt. It is a vicious cycle, and Pakistan is stuck in this state.

The government also needs to revisit the contracts of 2015, so the government can give the benefit to end consumers.