ISLAMABAD: The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has moved the Supreme Court of Pakistan for a forensic audit of independent power producers (IPPs), amid a worsening cost-of-living crisis in the South Asian country.
The development comes amid protests in Rawalpindi and Karachi by thousands of supporters of the Jamaat-e-Islami (JI) religio-political party, who have been calling for a review of Pakistan’s loss-making agreements with IPPs, reduction in power tariffs, revocation of additional taxes introduced in the last budget and other similar measures.
Pakistan has the highest electricity tariffs in the region and the government is currently on track to pay Rs2.1 trillion to the IPPs in capacity payments this fiscal year, while circular debt for the energy sector in 2024 reached Rs. 5.422 trillion. At the same time, numerous IPPs are being paid billions despite not producing any electricity.
All IPP contracts for the sale of electricity are structured in two tiers. First, the power purchaser is required to make “capacity payments,” which are required to cover all fixed costs of the IPPs, including debt repayments as well as Operations and Management costs (O&M Costs) and return on equity (RoE) at a stipulated rate, according to the FPCCI.
These capacity payments are to be made by the power purchaser whether or not any electricity is actually purchased. In addition to capacity payments, there is a variable cost attributable to the production of energy above a certain plant capacity factor (normally 60 percent). In other words, if more than 60 percent of a plant’s capacity is utilized for electricity generation, then the relevant IPP is entitled to additional payments. Fuel cost is treated as a pass-through item.
“In the light of the foregoing, it is respectfully prayed that this Honourable Court may be graciously pleased to direct the Government of Pakistan to commission a detailed and thorough forensic audit of all IPPs,” the FPCCI prayed in its petition, urging for the recovery of excess profits earned by IPPs, renegotiating all IPP agreements, and removing anomalies regarding the calculation of Internal Rate of Returns (IRR) on equity investments in all IPP agreements.
The FPCCI referred to a 288-page report by Committee for Power Sector Audit, Circular Debt Resolution and Future Roadmap from 2020, which it said identified more than Rs100 billion worth of excess payments made to IPPs and recommended a number of steps to identify power sector problems, including conducting a forensic audit and the recovery of prior excess payments.
“Till date, no such audit has been conducted nor have any prior excess payments been recovered. More importantly, there is no public explanation for why the 2020 Report remains unimplemented,” it noted. “Pakistan’s power sector is a thus a paradigmatic example of regulatory capture, where year after year the people of Pakistan continue to suffer at the hands of predatory elites.”
The FPCCI said the current situation was not only placing an “unbearable burden” on domestic consumers, but it was also forcing industries to either go off-grid or shut down, while the government was trying to recover higher and higher tariffs from a smaller and smaller pool of customers.
One of the main reasons for Pakistan’s perennial economic crisis is its electricity sector. Pakistan is on track this year to pay approximately Rs3.58 trillion in payments to electricity generating companies. Out of this total amount, approximately Rs2.63 trillion is likely to be recovered, while the remainder will be subsidised by the government. This unrecovered amount will be added to already existing circular debt of Rs5.422 trillion, according to the petition.
Currently, Pakistan has installed generation capacity of 45,885MW. Out of this, 23,860MW (52 percent) has been installed by state-owned entities (both federal and provincial), while the remaining capacity of 22,043MW (48 percent) has been installed by IPPs. It is important to note that as against its installed generation capacity of 45,885MW, the maximum power demand during the summers is around 30,000MW while winter peak loads are closer to 12,000MW.
Notwithstanding this current oversupply of electricity, IPPs are scheduled to add another 7,460MW of electricity by 2032. This capacity is in addition to the 11,550MW due to be added through the government’s own projects (4,320MW Dasu Hydroelectric Project due for completion in 2026, 4,500MW Diamer-Basha Hydroelectric Project due in 2029, 1,530MW Tarbela 5 extension due in 2026, and 1,200 MW Chashma 5 nuclear plant due for completion in 2031.
“It is estimated that during the current financial year (i.e. 2024 – 2025), capacity payments will total Rs2.1 trillion (equal to about 1.9 percent of GDP). In FY 2023-24, 45 percent of capacity payments were made to the government-owned plants, 15 percent to private parties (mostly local) and 40 percent to IPPs set up under CPEC (China-Pakistan Economic Corridor),” the FPCCI said.
“Notwithstanding the trillions being paid as capacity charges to the IPPs, actual capacity utilization of the IPPs is very low. In some cases, IPPs are getting paid billions in capacity charges without generating a single unit.”
It said it was also important to note the exponential manner in which such charges had increased.
“In 2015, an average of 13,000MW electricity was being consumed with capacity charges of Rs200 bn (against an installed capacity of about 20,000 MW). Today, consumption still averages around 13,000MW but capacity charges have increased by more than 1000 percent to Rs2.1 tr (against an installed capacity of about 45,885 MW),” the FPCCI added.
Pakistani industrialists move top court for forensic audit of independent power producers
https://arab.news/gnmxf
Pakistani industrialists move top court for forensic audit of independent power producers
- The development comes amid protests in Rawalpindi, Karachi for reduction in power tariffs and review of Pakistan’s loss-making agreements with IPPs
- Pakistan has highest tariffs in the region and the government is currently on track to pay Rs2.1 trillion to IPPs in capacity payments this fiscal year
Pakistan police arrest three over forced marriage of minor girl under tribal custom
- The 11-year-old was forcibly given in marriage by a village council to resolve a dispute in Dera Ismail Khan
- The girl’s father committed suicide by ingesting poisonous pills after recording distressing audio messages
PESHAWAR: Police have arrested three suspects and members of a local Panchayat (village council) in connection with the forced marriage of a minor girl under Vani, a tribal custom used to settle feuds, in a remote area of Khyber Pakhtunkhwa, according to a senior police official and a local elder.
The incident, which took place in the Bhagwani Shumali area of Paharpur, the main town in Dera Ismail Khan district, involved an 11-year-old girl from a low-income family being forcibly given in marriage to resolve a dispute last Friday.
Vani is an illegal practice where minor girls are handed over as compensation in cases involving murder or allegations of illicit relations.
Gohar Ali, Superintendent of Police (SP) for the Paharpur region, told Arab News that police acted swiftly upon receiving audio messages from the girl’s father, whom he identified only by his first name, Adil, and who died by suicide following the Panchayat’s decision.
Adil, a local barber, ingested poisonous pills after recording distressing audio messages naming the accused.
“The police immediately launched raids, rescued the minor girl and handed her over to her family,” the police officer said. “Three main suspects identified by the deceased person have been arrested, along with two members of the Panchayat. Additionally, Rs600,000 [$2,144] extorted from Adil by the makeshift council has been recovered,” the police officer added.
Malik Inayatullah, a local elder and chairman of the village peace committee, told Arab News he witnessed how the entire incident unfolded.
“The deceased left behind six daughters, including the one given to the rival family under the custom of Vani, and had no male child,” he said.
“The decision of the Panchayat is regretful,” Inayatullah continued. “It has not only robbed a young girl of her future but also cost her father his life. We have already extended our support to the girl’s family and will provide all possible help to rebuild their lives.”
The local elder said the dispute began when a local landlord accused Adil’s nephew of having illicit relations with the daughter of an influential figure in the area.
The latter convened the Panchayat before abducting Adil, subjecting him to torture and forcing him to sign a stamp paper agreeing to give his daughter in Vani to settle the matter.
“Neither Adil nor any villagers reported the incident to the police [on time], which could have prevented this tragic outcome,” police officer Ali said.
He said police were now investigating the case from multiple angles to ensure justice is served to the aggrieved family.
Pakistan PM expresses satisfaction over progress of IMF program, macroeconomic indicators
- An IMF mission is currently in Pakistan to analyze Islamabad’s progress on key conditions as part of first review of its $7 billion program
- Shehbaz Sharif says the program is vital to Pakistan as its federal reserves, inflation, banking system and policy rate are all linked with it
ISLAMABAD: Prime Minister Shehbaz Sharif on Tuesday expressed satisfaction over Pakistan’s progress regarding an ongoing International Monetary Fund (IMF) program and macroeconomic stability in the country.
The South Asian country, which has faced an economic meltdown in recent years, is treading a long path to economic recovery under a $7 billion IMF program it secured in Sept. last year.
An IMF mission is currently in Pakistan to analyze Islamabad’s progress on key conditions as part of first review of the facility. A successful review will result in the release of around $1 billion to Pakistan as second installment under the program.
Speaking to his cabinet members, Sharif said the ongoing negotiations with the IMF were “satisfactory” and moving forward in a good manner.
“The IMF mission is here [in Pakistan]. The foreign minister and his team, and other ministers are holding talks with it,” the prime minister said in televised comments.
“I believe this program is important for our growth because our federal reserves, inflation, core inflation, your banking system, lowering of policy rate, all these are linked with this.”
Finance Minister Muhammad Aurangzeb last month said they were confident of meeting targets of the IMF program. Pakistan was able to build some trust with the IMF by completing a short-term, nine-month program last year.
Previous loan programs in Pakistan ended prematurely or saw delays after the governments at the time faltered on meeting key conditions.
Sharif said Pakistan’s growth was vital to meeting these conditions and for that, agriculture, industries, commerce, finance, IT, mines and minerals and maritime sectors were of great significance, hoping his cabinet’s members would transform their ministries to this effect.
“A complete transformation of railways is required. Similarly, there is huge potential in maritime,” he said.
“There would be a review of our ministries every three months, I will sit with you and the results of the review will be presented before the nation.”
Pakistan sets sights on record $36 billion remittances this year
- Pakistan recorded year-on-year growth of 38.6 percent in remittances with record inflows of $3.1 billion in February, central bank said on Monday
- Among factors driving up remittances are reforms to curb illegal foreign exchange trading and incentives implemented by the central bank
KARACHI: Pakistan hopes to receive record $36 billion remittances this fiscal year through June, the finance minister said on Tuesday, as the South Asian nation seeks to boost its foreign exchange reserves in line with the tough conditions of an International Monetary Fund (IMF) loan program.
The lender wants Islamabad to increase its foreign exchange reserves to a level that can finance three months of imports. Presently, the country holds $11 billion reserves, providing two months of import cover.
Remittances are a lifeline for Pakistan’s cash-strapped economy, playing a critical role in stabilizing foreign exchange reserves and supporting balance of payments.
Pakistan recorded year-on-year growth of 38.6 percent in remittances with record inflows of $3.1 billion in February, the central bank said on Monday.
“In this fiscal year [2024-2025], we will again complete it at an all-time high,” Finance Minister Muhammad Aurangzeb said in a televised speech. “At this moment, our estimate is that about $36 billion remittances inflow will come into the country.”
In February 2025, according to central bank data, Pakistan received its highest inflows from Saudi Arabia, $744.4 million, followed by the UAE, which contributed $652.2 million. Remittances received from the United Kingdom and the United States stood at $501.8 million and $309.4 million respectively.
“Cumulatively, with an inflow of $24 billion, workers’ remittances increased by 32.5 percent during July to February FY25 compared to $18.1 billion received during July to February FY24,” the central bank said in a statement.
Among factors driving an increase in remittances are reforms that have curbed illegal foreign exchange trading and incentives implemented by the State Bank of Pakistan. Decreased global inflation rates have encouraged Pakistani migrants to send more money back home.
Families in Pakistan are also relying more on financial support from relatives working abroad due to inflation at home.
Pakistan’s consumer inflation rate slowed to a near decade low of 1.5 percent in February, largely due to a high year-ago base. That was below the government’s forecast and significantly lower than a multi-decade high of around 40 percent in May 2023.
The central bank’s policy committee said on Monday it expected inflation to fall further before gradually inching up and stabilizing within the state bank’s 5-7 percent target range.
The state bank kept its forecast of full-year GDP growth at 2.5 percent to 3.5 percent and said it expected economic activity to gain further momentum.
Pakistan’s economy grew by 0.92 percent in the first quarter of the fiscal year 2024-25 which ends in June.
On Monday, the central bank unexpectedly halted its easing cycle, keeping its key policy rate at 12 percent, saying there could still be price risks including from an escalation in global tariffs even though inflation was falling for now.
Militants attack train in southwest Pakistan, driver injured — official
- BLA says five military troops killed, hundreds of passengers in custody, claims not confirmed by officials
- Low-level separatist insurgency in Balochistan is one of the chronic security problems undermining stability in Pakistan
QUETTA: Separatist militants on Tuesday attacked a passenger train operated daily from Pakistan’s southwestern Balochistan province to other parts of the country, injuring the driver, a Pakistan Railways official said.
A low-level separatist insurgency in Balochistan is one of the chronic security problems undermining stability in Pakistan. The separatists accuse the government of stripping the province’s natural resources and leaving its people mired in poverty. They say security forces routinely abduct, torture and execute ethnic Baloch, accusations echoed by human rights campaigners. Government officials and security forces strongly deny violating human rights and say they are uplifting the province through development projects, including multi-billion dollar schemes funded by Beijing.
Insurgents in the province also target civilians, especially Pakistanis from other ethnic groups who have settled in Balochistan.
The latest attack on the Quetta-Peshawar bound Jaffar Express occurred in Mushkaaf, an area in the mountainous Bolan range of Balochistan. The Baloch Liberation Army, the most prominent among separatist outfits operating in the province, accepted responsibility in a statement sent to the media.
“A driver of the train was injured after armed men targeted the train with heavy firing,” Muhammad Farrukh, a Pakistani Railway official in Quetta, told Arab News. “We are unable to contact railway staff in the area because mobile service is not working in the area.”
He said there were 400 people onboard the train but could not confirm if they were safe.
The BLA said it had blown up the railway track, forcing the Jaffar Express to come to a halt.
“The fighters swiftly took control of the train, holding all passengers hostage,” the group said, adding that six military troops had been killed. The claims have not yet been confirmed by government officials or the army, which plays an outsized role in the running of the remote province, bordering Afghanistan and Iran.
Separatists have also recently attacked projects being developed as part of the $65-billion China Pakistan Economic Corridor (CPEC), part of President Xi Jinping’s Belt and Road Initiative. The program is also developing a deep-water port close to the new $200-million airport in Gwadar, a joint venture between Pakistan, Oman and China.
‘Really suffocating’: Pakistan emerges from record smog season
- Tens of millions of Pakistanis spent four months breathing toxic air 20 times above safe levels in worst winter smog season in years
- This year, winter rains that bring relief did not arrive until February as climate change renders Pakistan’s weather patterns increasingly unpredictable
LAHORE: Tens of millions of Pakistanis spent at least four months breathing toxic air pollution 20 times above safe levels, in the worst winter smog season for several years, according to data analyzed by AFP.
Pakistan regularly ranks among the world’s most polluted countries, with Lahore often the most polluted megacity between November and February.
AFP’s analysis of data recorded since 2018 by independent air monitoring project AQICN shows the 2024-2025 winter smog season started a month earlier in October and persisted at higher levels, including in cities normally less affected by pollution.
Lahore’s 14 million residents spent six months breathing concentrations of PM2.5 — tiny particles that can penetrate the lungs and bloodstream — at levels 20 times or more than recommended by the World Health Organization.
Those in Karachi, Pakistan’s biggest city, and the capital Islamabad were subjected to 120 days of the same choking pollution levels.
“The smog is just getting worse every year,” admitted a factory owner in Lahore, who wished to remain anonymous after openly criticizing government policies.
“If I was rich, my first decision would be to leave Pakistan for Dubai, to protect my children and raise them in a smog-free environment,” he told AFP.
Experts say the pollution is primarily caused by factory and traffic emissions. It worsens in winter as farmers burn crop stubble and cooler temperatures and slow-moving winds trap the deadly pollutants.
This year, winter rains that typically bring relief did not arrive until late February, as climate change renders Pakistan’s weather patterns increasingly unpredictable.
The smog was so thick it could be seen from space and prompted authorities to close schools serving millions of students across the largest province Punjab, including its capital Lahore.
Young climate activist Risha Rashid said Islamabad is fast becoming “another Lahore” and has launched legal action against the government.
“It’s really suffocating,” the 21-year-old, who has asthma, told AFP.
“I cannot go out, even if I have exams. It’s not just affecting our physical health but our mental health as well.”
An Ipsos poll in November found four out of five Pakistanis said they were affected by the smog.
It can cause sore throats, stinging eyes and respiratory illnesses, while prolonged exposure can trigger strokes, heart disease and lung cancer.
Its effects are worse for children, who breathe more rapidly and have weaker immune systems.
This smog season, Punjab’s provincial government declared a “war on smog,” increasing public air quality monitoring devices tenfold to around 30 and offering farmers subsidised rentals of machinery to clear crop stubble and avoid burning.
It also pledged to increasingly enforce emissions regulations on tens of thousands of factories and more than 8,000 brick kilns, a major source of black carbon emissions.
But environmentalists and experts say action has been piecemeal and sometimes counterproductive, including restrictions on private air quality monitoring devices that the government claims give “misleading results that spread panic.”
And anti-smog machines, including a tower in Lahore shut down two months after installation, are effectively useless, experts say.
“It is like putting an air conditioner out in the open,” said one who spoke on condition of anonymity.
Efforts that tackle pollution’s effects, rather than its source, miss the point, said Ahmad Ali Gul at Lahore’s University of Management and Technology.
“It’s like when you have a bathtub and it’s overflowing and it’s creating a huge mess, do you first grab a towel or you first close the tap?” he said.
“First, we need to focus on reducing the emissions and then we talk about how to protect ourselves from smog.”
The government has blamed rival India, which borders Punjab province, for pollution blowing over into Lahore.
But Pakistan has limited vehicle emissions standards, and officials admit 83 percent of Lahore’s carbon emissions are from transport.
“Switching to a cleaner fuel would give immediate results, we’ve seen it in other countries,” said Frank Hammes, the global CEO of the Switzerland-based AQI air quality project.
But that “needs a pretty strong central effort to push down sometimes the painful changes that need to be made in order to reduce air pollution,” he added.
Pakistan’s government wants electric vehicles (EVs) to account for a third of new sales by 2030.
Cheaper Chinese models launched in Pakistan in 2024, but currently make up just a fraction of overall car sales in a country where 40 percent of the 240 million population lives in poverty, according to the World Bank.
Pakistan had a taste of clean air during the pandemic, when a lockdown forced vhicles off the streets and factories to close in March 2020, but it was short-lived as the economic impact was too great for many to bear.
“Air quality improved so much that we could even see the stars in Lahore in the evening,” said Omar Masud, a director of Urban Unit, which analyzes pollution data for the government.
While climate change can make air pollution worse, few Pakistanis worry about global warming, explained Abdul Sattar Babar, Ipsos director for Pakistan.
“Most Pakistanis are overwhelmed by the economic challenges that they are facing,” he said.
“When you can barely survive, climate issues are obviously not your primary concern.”
