'Great Debate': Power minister, CEOs, experts weigh in on controversial issue of IPPs

Federal Minister for Energy (Power Division) Awais Leghari, alongside top officials of private electricity companies, and economists, are weighing in on the contentious issue of independent power producers (IPPs) capacity payments at Geo News talk show "Great Debate: Pakistan Kay Liye Kar Dalo".

In the debate anchored by Senior journalist, analyst and anchor Shahzad Iqbal, Leghari addressed the growing public outcry over skyrocketing electricity bills and the ongoing debate surrounding capacity payment charges (CPC) to IPPs.

He acknowledged the need for a thorough review of these agreements, hinting that the government is open to exploring ways to renegotiate terms with IPPs to bring some relief to consumers.

Hubco CEO Kamran Kamal, Lucky Electric Power CEO Rohail Muhammad, FPCCI Vice President Asif Inam, former caretaker minister Gohar Ijaz, and Economist Ammar Habib Khan added their voices, stressing the urgency of reforms.

With rising inflation and energy costs, nearly all participants, including prominent entrepreneurs, were on the same page regarding the fact that it was high time to reconsider the current arrangements.

As the programme unfolds, the discussion is expected to delve deeper into whether revising IPP contracts can lead to immediate relief for the public.

The government is in a catch-22 situation. The high cost of electricity has become a contentious political issue, with opposition parties leveraging public dissatisfaction to criticise the incumbent government’s handling of the energy sector.

Analysts say that the political implications of the controversy surrounding capacity payments to IPPs are equally significant. The burden of high electricity tariffs falls disproportionately on the middle and lower-income segments of society, fuelling public outrage and eroding trust in the government’s ability to manage the economy. The controversy also exposes the challenges of governance and accountability in Pakistan's energy sector.

Addressing these governance issues is crucial for restoring public trust and ensuring the sustainable development of the energy sector.

A successful renegotiation with both local and international IPPs would drastically reduce tariffs, boost industrial competitiveness, and increase public trust in the government's ability to effectively manage the economy.

On the other hand, a failed renegotiation could multiply the tariffs, bringing the government and consumers under added financial strain, crippling industry, and fanning the public unrest. Any populism-driven deviations from International Monetary Fund (IMF) terms under the current $7 billion loan programme will not bode well for the country’s macroeconomic stability.

A status-quo in the situation, would however lead to the government scrambling for quick fixes to defuse the growing public anger without actually solving the problem once and for all.

This is a developing story and is being updated with more details.