UBG patron-in-chief announces progress in resolving IPP contract issues
Over the first ten months of the current fiscal year 2023-24, power generation witnessed a 3% drop, totalling 100,980 GWh compared to 103,593 GWh during the same period in the previous year. photo: REUTERS
The United Business Group (UBG) Patron-in-Chief S.M. Tanveer, has reported significant advancements in resolving issues with 107 Independent Power Producer (IPP) contracts under the Federation of Pakistan Chambers of Commerce and Industry (FPCCI).
Following cabinet approval, the first five contracts were finalised on Thursday.
This milestone is notable as these IPPs have been receiving Rs100 billion annually in capacity charges, despite generating minimal electricity for years.
The UBG expressed appreciation for the efforts of the Task Force on IPPs, led by Special Assistant to the Prime Minister Mohammad Ali, alongside senior establishment officials.
Their efforts aim to enhance Pakistan's economic and social sustainability through a revision of the IPP contracts to a "take and pay" basis. This new arrangement will ensure payments are made only for electricity produced and supplied, alleviating the financial burden on the country.
Critics have previously pointed out that the existing "take-or-pay" model in IPP contracts guarantees a steady income for IPPs regardless of electricity demand, forcing the government to pay for unutilized electricity and exacerbating the circular debt crisis.
The successful renegotiation of these contracts is viewed as a crucial step toward addressing the challenges facing Pakistan's energy sector and fostering a more sustainable future.
S.M. Tanveer, Patron-in-Chief of UBG, expressed gratitude for the success of their campaign, emphasizing their commitment to serving the business community in the country.