Energy deals warning

One of the highest in the region, Pakistan's power tariff has literally scuttled avenues of growth. As an immediate consequence, the high power tariff has decimated our export base, making our produce uncompetitive in the international market. On the other hand, domestic consumers are reeling under inflated electricity bills, squeezing their income, purchasing power and social mobility in totality. This is so because the country is under an insane power-purchase agreement (PPA) with Independent Power Producers (IPPs) at an exorbitant cost, and at the same time is a net importer of fossil fuels. Any attempt to come out of this vicious cycle is met with centrifugal resistance, compelling the status quo to stay afloat.

A recent warning from a coalition of top lenders, cautioning the government to desist from any unilateral alteration of PPAs with IPPs, is a case in point. We are reminded that such a move could lead to erosion of investor confidence and disrupt future financing in the energy sector. The beleaguered and cash-starved dispensation, of late, has been mulling the option to renegotiate with the IPPs and to scrap some of the deals that had not stood their commitments genuinely. That is warranted because of soaring unrest in society over power bills, and the inability of the economy to perform under a loaded invoice of cost inflation.

It is, however, pertinent to note that the government had hinted at cutting the power tariff by, at least, Rs10 per unit to provide some breathing space to consumers and kick-start momentum in a stalled economy. Incidentally, the Energy Taskforce that met last month had floated a proposal to revise PPAs for the collective good of the economy. That seems to have hit snags through an unconventional, as well as an impolite, SOS from DFIs. If honouring international commitments is taken as part of sovereignty, then relooking into them for the betterment of sovereigns is also a done deal. The government should revisit the PPAs and reengage the IPPs for working out a better, win-win deal.