Imtiaz Gul
It could have happened only in Pakistan, reeling from a governance model that is tailored to benefit only the ruling elites and their cronies; front-loaded capacity charges by the Independent Power Producers (IPPs), that have cost this poor nations hundreds of billions since the Pakistan Peoples’ Party (PPP) introduced the IPP policy in 1994. Not a single government since dared to question the willfully deceptive invoices most IPPs were producing against services- at times even for idle power plants.
An example, quoted by former commerce secretary Younus Dagha in an article, amply demonstrates the fraud that IPPs have been committing on this nation for over two decades.
Capacity charges by 12 furnace oil-based IPPs – against just ONE percent power generation for 2019-20 – were projected at a cost of Rs.79billion.
Lo and behold, the capacity charges component in this was Rs.58bn – a staggering 71 percent – being charged by plants that have been in operation for 15 to 25 years.
Contrast
Contrast this with a new government owned generation plant at Guddu which was installed in 2013; production of about six percent of the demand cost it about Rs.72bn with only Rs.23bn in capacity charges – roughly 30 percent.
Imagine the 100s of billions – if not thousands – that many of these IPPs have charged this country since 1994!
Strangely, though not unexpectedly, the public-private sector robber barons had joined hands to skim off the government kitty by arguing that high capacity charges are because of expensive, front loaded loans that need to be paid back within ten years.
According to Mr.Dagha, who came out with these startling figures only after taking early retirement, at least 20 furnace-oil fired plants need to be immediately terminated as they are either not in production any more or are a big source of pollution and hence are not being asked for producing electricity for the system, though all of them still pocketing money in the head of capacity charges.
Alone on the basis of the pollution accruing from the use of furnace oil in 2nd/3rd generation power plants, the government would have won cases against these IPPs hands-down had it challenged their continued extortion in the name of capacity charges.
No surprise therefore that a well-meaning Senator Nauman Wazir, an aviation engineer by profession, dug out the truth about the fraudulent practices including invoices based on presumptive, manipulated figures on heads such as fuel consumption and outstanding loans to extract maximum capacity charges, even by companies who had paid out their investments and been minting money after the 11thyear of operation to date. Some even recovered their investment within first five years and made the killing thereafter.
Let us give Nauman Wazir and his party for going after the vultures of the status quo within the IPPs.
The sub-committee on power led by Senator Wazir even proposed filing criminal cases against many IPPs for providing “wrongful data” including the inflated capacity charges and interest rates.
Sad, that until now nobody dare take on the IPPs cartel. Even the NEPRA, supposed to be the regulator and watchdog, appeared to be hand in glove in this extortion and kept supporting IPP demands as well as passing the burden of costs to consumers by agreeing to demands of cost adjustments.
Credit also goes to Prime Minister Imran Khan having dug in his heels against these companies, who had initially threatened the government with international arbitration but have now agreed “in the national interest” to reduce capacity charges. The MoU agreed upon between the government and the IPPs has yet to go through the approval procedures before it goes into operation, yet the outcome is likely to be greatly helpful in containing the vicious cycle of circular debt.
Even the new IPPs, mostly Chinese, as a great goodwill gesture have also agreed to cut down their capacity charges, which according to some estimates may lead to a saving of upto a trillion rupees.
If the capacity charges do go downward without any major legal or administrative battle, one would hope to have plugged the gaping whole to a great extent for the future.
But Pakistan would remain in a big mess for quite some time. Why?
Because Pakistan’s peak power requirement is still less than 20,000 MW, whereas the already installed capacity – thanks to former PM Nawaz Sharif – is over 33,000 MW. It means the country shall continue to pay capacity charges to the IPPs who are not required to produce electricity because of no demand. A crime – advertent or otherwise – committed in 1990s was multiplied through over-commissioning of coal and combined cycle power plants.
