FPCCI to challenge IPPs capacity charges in SC

KARACHI: The Federation of Pakistan Chambers of Commerce & Industry (FPCCI) has announced a last-ditch effort to save the Pakistani economy and its people from the burden of “unbearable capacity charges” imposed by independent power producers (IPPs).

In a statement released on Tuesday, Acting President of the FPCCI Abdul Mohamin Khan declared the organization’s intent to challenge these charges in both the Supreme Court and the Special Investment Facilitation Council (SIFC).

Khan emphasized the frustration of the business community, which has been “loud and clear” in expressing concerns over IPP capacity charges. He lamented that despite the business community being the primary stakeholder, it has not been included in consultations regarding the resolution of this issue.

The FPCCI outlined a three-pronged charter of demands to address the power sector crisis: a forensic audit of IPPs; abolishment of capacity charges, advocating for payment based solely on the electricity generated, not just the capacity available; and the renegotiation of power purchase agreements.

Khan pointed out the staggering cost burden, highlighting that Pakistan paid an estimated Rs2,000 billion in capacity charges during FY24, with projections of a further increase to Rs2,700-2,800 billion in FY25. He further explained the impact of dollar-indexed guarantees, where a weakening Pakistani rupee translates to higher returns for IPPs, squeezing both the government and people financially.The FPCCI’s demands extend beyond audits and renegotiations. They advocate for a complete review of IPP agreements, a price re-evaluation within legal boundaries, and improved oversight to prevent over-invoicing. It also urged the government to examine energy infrastructure contracts for potential misinformation and fraud.

Khan concluded by urging the federal government to devise a comprehensive strategy to deal with IPPs and ensure affordable electricity for the sake of the national interest and industrial development.

The textile industry speaks up:

Echoing the FPCCI’s concerns, the Pakistan Yarn Merchants Association (PYMA) also called for a reevaluation of IPP contracts. Chairperson of PYMA Sheikh Khalil Qaiser, alongside senior officials, including Senior Vice Chairperson Sohail Nisar, Vice Chairperson Jaweed Khanani, and members of the Executive Committee, expressed fears that high electricity and gas rates, coupled with additional IPP capacity charges, could cripple the textile industry and severely impact exports.

PYMA officials emphasized the crippling effect of already unsustainable energy costs on the industry, warning that further burdens could force widespread closures. They questioned the government’s commitment to economic stability when such policies threaten the very foundation of industrial operations.