Need to revise power pacts

The recent outcry from the business community against the Independent Power Producers (IPPs) highlights an urgent issue that demands the government’s attention. With electricity tariffs soaring due to exorbitant capacity charges, the sustainability of Pakistan’s industrial sector is at stake. These contracts, initially aimed at addressing power shortages and attracting private investment in the energy sector, have instead burdened the nation with exorbitant costs and inefficiencies. Revisiting these agreements is crucial for Pakistan’s economic stability and sustainable energy future.

The United Business Group (UBG) patron-in-chief revealed at a press conference this week that the government is paying a staggering Rs2 trillion in capacity charges to IPPs that are not even operational. This financial burden is unjustly passed on to consumers, inflating their electricity bills. The electricity base tariff for domestic consumers stands at a massive Rs48.84, adding yet another layer of financial strain on households already struggling with high taxes and meagre salaries. Amidst the current rate of inflation, many families find it increasingly difficult to bear the burden of soaring utility costs. Such high tariffs are crippling local industries too, rendering them uncompetitive in the global market, and leading to closures and job losses. The disparity in power tariffs is a significant barrier to FDI, essential for economic growth and industrial revival.

The pressing need to renegotiate these agreements cannot be overstated. The government must prioritise the larger interest of 240 million people over the interests of a few IPPs. The current power tariffs are untenable and risk further industrial decline and increased unemployment. A balanced approach, aiming for a sustainable power tariff of nine cents per unit, as proposed by industry leaders, is crucial for the survival and growth of the industrial sector. The government must act decisively to rectify these imbalances, ensuring a competitive, thriving industrial landscape that can meet ambitious export targets and sustain employment.