Karachi: Zubair Tufail, former President of the FPCCI and Chairman of Tufail Group has warned that without a review of the Capacity Payment Agreements with Independent Power Producers (IPPs), Pakistan could face severe business disruptions and industry closures. He says, could lead to economic decline and jeopardize the country’s exports.
In a special interview, Tufail highlighted that Pakistan has become one of the most expensive countries in the region for electricity due to these IPP agreements. The cost of production is increasing, which may lead to the cancellation of export contracts. He criticized the previous governments for their poor planning and said that the agreements made with power plants have become a major headache for the entire system.
Tufail emphasized that Capacity Payment Agreements with IPPs are a significant cause of the economic crisis in the country. He pointed out that whether or not electricity is purchased, its cost must be paid, and payments are required in dollars. Despite the fact that only 47.9% of the electricity produced by IPPs is utilized, 100% of the payments are being made to them. The devaluation of the rupee has further exacerbated the issue.
He also noted that instead of promoting alternative energy sources like wind power, the system discourages their use while continuing to make Capacity Payments to these power plants. The government’s incompetence and poor planning, coupled with these agreements, are putting the burden on the public.
The officials of the Power Division also cite Capacity Payment Agreements with IPPs as the primary reason for the high electricity prices. Tufail warned that if these agreements are not reviewed, consumers will end up paying billions of rupees annually for electricity they do not use. Recent increases in electricity prices will not reduce the circular debt or improve the electricity system. The billions of rupees collected from consumers will be used for Capacity Payments to power plants.
