Karachi: Mr. Saquib Fayyaz Magoon, Acting President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), has called for the federal government to nullify all contracts with Independent Power Producers (IPPs) and seek more affordable electricity sources for the national grid.

According to Federation of Pakistan Chambers of Commerce and Industry, Mr. Magoon highlighted the severe impact of the current agreements on Pakistan's economy, citing exorbitant electricity tariffs that have led to industrial shutdowns and widespread job losses. With an installed capacity of over 40,000 MW and a peak demand of only 25,000 MW, there exists a considerable surplus in generation capacity. He also noted that the PKR 2 trillion paid in capacity payments to 40 companies has significantly paralyzed economic activities. Mr. Magoon pointed out that capacity charges, which constitute two-thirds of the total electricity cost, are paid to IPPs even when no power is generated or supplied.

The FPCCI chief criticized the unusually high returns exceeding 73 percent in dollar terms that IPPs receive, which are out of step with global norms. These returns are exacerbated by contracts that are indexed to the US dollar, leading to increased costs with the depreciation of the Pakistani rupee. Mr. Magoon called for a comprehensive review of these contracts, especially those that include inflated invoicing on capital goods, leading to unjustifiably high returns for IPPs.

He also stressed the need for improved oversight and auditing to address misreporting and overbilling practices by IPPs, which are often protected by international law under take-or-pay contracts. The FPCCI's demands include a re-evaluation of pricing, stringent oversight to curb over-invoicing, and a strategy to ensure affordable electricity pricing that aligns with the national interest.