Scrutinising IPPs

The Senate committee's recent concerns over the lack of transparency in Independent Power Producers (IPPs) contracts that have plagued Pakistan's energy sector for decades were long overdue. The committee's call for a forensic audit of these contracts is a critical step toward addressing the systemic inefficiencies and injustices that have burdened citizens with exorbitant electricity tariffs and unsustainable debt.

The genesis of this problem dates back to the 1994 energy policy spearheaded by the PPP. The policy, intended to revolutionise Pakistan's energy landscape, has since proven to be deeply flawed, with disastrous consequences for the national exchequer. Contracts offered to IPPs, particularly the capacity payments made in US dollars irrespective of electricity production, have today created a financial quagmire. These payments, coupled with the depreciation of the rupee, have escalated into a significant debt obligation that the government now struggles to manage. This unsustainable financial model has directly contributed to the soaring electricity tariffs that weigh heavily on both households and industries. The mounting public outcry, exemplified by Jamaat-e-Islami's recent sit-in in Rawalpindi, reflects widespread frustration with a system that seems to prioritise corporate profit over public welfare.

Announcement by the government of a new policy framework is a step in the right direction, but mere policy declarations will not suffice. For real progress, the proposed forensic audit must delve deeply into the specifics of these contracts - examining the terms, capacity charges and operational timelines. Transparency is paramount, and the findings should be made public to ensure accountability. More so, there is an urgent need to renegotiate these agreements, aiming to reduce the exorbitant cost of electricity and ease the financial strain on the state and its citizens. This would be complex and fraught with legal hurdles, as IPPs are likely to resist changes that impact their profitability. But the government must persist.