Heinous Role of Some IPPs in Pakistan

In a shocking revelation, certain Independent Power Producers (IPPs) in Pakistan have come under scrutiny for their alleged role in exploiting the country’s resources while failing to deliver electricity as promised. Despite signing lucrative contracts with the government, these IPPs continued to receive full compensation while not generating any power, causing severe losses to the national treasury.

Mismanagement and Flawed Contracts

According to reliable sources, some IPPs signed contracts with the Pakistani government but did not provide the electricity they were contracted to generate. Yet, they kept reaping billions in compensation. These poorly structured agreements contributed to a significant loss for the national exchequer. Moreover, compared to other countries, Pakistan installed wind power plants at four times the cost for similar capacity, hinting at deliberate over-invoicing and mismanagement.

Over-invoicing and Expensive Inputs

Many of these IPPs opted for overpriced foreign oil despite having access to local coal mines. This raised production costs unnecessarily. The power policies implemented in Pakistan in 1994, 2002, and 2015 were inherently flawed, with no proper checks in place. Contracts were based on a 17% dollar-based return, an exorbitant rate that significantly hurt the country’s economy. The absence of transparency in these agreements, combined with the lack of competitive bidding, further aggravated the situation.

The Dollar Burden on Pakistan’s Economy

One of the most damaging aspects of these contracts is their linkage to the dollar. As the rupee continued to devalue the dollar, the burden of these contracts on the Pakistani economy grew exponentially. No forensic audits were conducted on the heat rate – a key indicator of fuel consumption – leaving unanswered questions about whether the IPPs used the correct amount of fuel for power generation.

Calls for Policy Revisions and Audits

Experts are now calling for an overhaul of the 2015 power policy to bring relief to the economy and shift future contracts to the local currency. This would reduce Pakistan’s reliance on the dollar and curb the rising costs caused by the exchange rate fluctuations. There is also growing pressure on IPPs to submit to forensic audits, but they have so far been reluctant.

Conclusion

The revelation of fraudulent practices within certain IPPs has sparked calls for significant policy changes. These changes could lift the burden of dollar-linked contracts and ensure a more transparent and competitive process for awarding future power projects. Until then, the ongoing mismanagement of power generation contracts continues to weigh heavily on Pakistan’s already fragile economy.