Power Division grilled over IPP costs, circular debt
The Senate Standing Committee on Power on Wednesday grilled the Power Division over its failure to provide clear answers on the cost and efficiency of the IPPs, the unchecked rise in circular debt and persistent electricity load-shedding during peak summer months.
The committee, chaired by Senator Mohsin Aziz, expressed strong dissatisfaction with the Power Division's lack of transparency.
"We asked for a global comparative analysis of IPP power plants over a year ago, but no data has been shared," Senator Aziz said. He lamented the division's continued reluctance to share heat efficiency figures, calling the IPP arrangements unjust from the outset.
Senator Shibli Faraz lambasted the Power Division for dodging questions.
"Over the past four years, we've received no clear answers. These projects were the result of collusion. Costs were artificially inflated to increase profits, not due to genuine investment. This has crippled our economy and burdened generations," he said. He condemned the ongoing use of bank loans to settle circular debt, saying, "We celebrate borrowing like it's a success story".
Faraz also stressed that the Power Division must stop hiding behind task forces and face parliamentary scrutiny head-on.
Responding to criticism, Power Secretary Rashid Mahmood Langrial explained that circular debt payments were now linked to existing debt-servicing surcharges and assured the committee that no new financial burden would be passed onto consumers. He defended the government's decision to reduce electricity subsidies, saying it helped control the circular debt.
Langrial admitted that certain IPPs had been granted excessive rates of return and said, "We have already recovered an additional Rs30 billion in excess profits from IPPs earned through fuel and O&M margins."
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Express Tribune
2 hours ago
- Express Tribune
'Mining access equal for all'
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He held the Power Division responsible for the current circular debt and gas curtailment issues, stating that the power sector is not prepared to lift the required gas supply. Moreover, the Power Division had taken approval from the cabinet to reduce take-and-pay guarantees for LNG, making the power sector a key contributor to the problem. Take and pay guarantees have been reduced to 50% from 60%, which has irked the Petroleum Division. The petroleum minister stated that there should be a unified energy ministry, and the Petroleum Division should be taken on board for any decision relating to the energy sector. Pakistan is currently facing an excess supply of Liquefied Natural Gas (LNG), a situation largely attributed to its second long-term deal with Qatar. This agreement, initially envisioned to bolster energy security, has instead led to an expensive surplus of LNG within the country. The current government is now actively working to balance the nation's energy demand and supply. 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Regarding a waiver to China and India, the minister said that they were not in an IMF programme whereas Pakistan is in an IMF programme. "Therefore, we have to be careful regarding whether we have to take a waiver or not," Malik remarked, adding "we cannot go to default." About oil imports from Iran, he said that the country is still facing restrictions from the US. "The ministerial committee has to take a decision on this," he added. Addressing refinery upgradation, he asserted that the refineries' demands were justified, and tax has been exempted on their output and their margins have been regulated. "This is against basic principle," Malik remarked, adding that undue burden should not be put on the refineries if the government wants them to invest $5-$6 billion in upgradation projects. He said that the matter of zero-rating was raised with the IMF, which stated that 'zero-rate' would not be viable. 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Business Recorder
a day ago
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Crypto mining, other sectors: IMF rejects Pakistan's subsidised power tariffs proposal
ISLAMABAD: The International Monetary Fund (IMF) has rejected Pakistan's proposal to offer subsidised electricity tariffs to crypto mining and certain industrial sectors, warning that such moves would create new complications in the already strained power sector. Testifying before the Senate Standing Committee on Power, chaired by Senator Mohsin Aziz, Secretary Power Dr Fakhray Alam Irfan stated that all major power sector initiatives must be cleared by the IMF. He noted that although Pakistan has surplus electricity, particularly in winter months, the IMF is cautious about any pricing mechanisms that could distort the market. In September 2024, the Power Division proposed a six-month incremental consumption package (October–March) at marginal cost (Rs 23/kWh), based on last year's usage. However, after two months of discussion, the IMF only approved a three-month version, citing potential market distortions. The curious case of Bitcoin mining in Pakistan In a subsequent plan shared in November 2024, the Power Division suggested a targeted marginal cost-based package (Rs 22–23/kWh) for energy-intensive industries such as copper and aluminium melting, data centers, and crypto mining, arguing it would boost consumption of surplus electricity and reduce capacity charges. Still, the IMF rejected the proposal, stating it resembled sector-specific tax holidays that have historically created imbalances. 'As of now, the IMF has not agreed,' Dr Irfan confirmed, adding that the plan is also under review by the World Bank and other development partners. He emphasised that the government has not withdrawn the proposal and remains engaged with international institutions to refine it. During the session, a heated debate also emerged on the government's recent agreement with scheduled banks to reduce the circular debt stock of Rs 1.275 trillion. Senator Shibli Faraz criticised the deal, stating that banks were 'forced at gunpoint' to offer the loans. 'If I were a banker, I would have refused,' he said, warning that the burden would fall on consumers through future levies. Secretary Power rebutted this claim, clarifying that no new levies have been imposed. He stated that the existing Debt Servicing Surcharge (DSS) of Rs 3.23/kWh will continue for the next five to six years to recover the amount. He also highlighted that circular debt inflows have been reduced through timely subsidy injections. On consumer facilitation, Dr Irfan reported that over 500,000 people have downloaded the 'Apna Meter Apni Reading' app, allowing users to upload photos of their meter readings to potentially reduce inflated billing. He said the app will soon be extended to K-Electric (KE) users. The committee also expressed displeasure over the absence of the Federal Minister for Power, who was expected to answer questions on Independent Power Producers (IPPs) and sectoral inefficiencies. Senator Mohsin Aziz said the establishment of certain IPPs was an injustice and questioned why excess profits have not been recovered. Senator Shibli Faraz alleged that inflated project costs were used to justify higher returns, adding that no real steps have been taken to curb the circular debt crisis. 'The public is bearing the burden of government inefficiencies,' he said. Senators raised concerns about forced load shedding, especially in areas like Tharparkar, Matiari, and Umerkot, where daily outages last up to 14 hours, despite consumers paying their bills. Senator Poojo Bheel accused local officials of corruption, claiming they take bribes for illegal connections and restore disconnected supplies for a 'fee'. He emphasised that even paying customers are facing denial of their rights due to systemic failure. In response, Dr Irfan explained that revenue-based load shedding occurs in areas with losses exceeding 20%, citing a tragic case where a SEPCO employee was fatally stabbed during a disconnection drive. KE's Chief Distribution Officer Sadia Dada said that out of 2,100 feeders, about 30% face load shedding due to high electricity theft, often through Kundas (illegal hooks) in informal settlements. She said consumer bills are now offered in instalments to ease payment difficulties. Dr Irfan stated that 58% of consumers fall under the 'protected' category, paying Rs 10 per unit. With the approval of international partners, the government will allocate Rs 250 billion in subsidies, while also rolling out more tech-based solutions for theft control. So far, 500,000 people have downloaded the meter reading app, with 250,000 registered users. 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Express Tribune
a day ago
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New levies to raise fuel oil prices
OCAC urged the Special Investment Facilitation Council to intervene and recommend the withdrawal of petroleum and climate support levies on furnace oil, which would help restore policy consistency and support critical sectors. PHOTO: FILE Listen to article The Oil Companies Advisory Council (OCAC) has cautioned the Special Investment Facilitation Council (SIFC) that the climate support and petroleum levies on furnace oil have become effective from July 1, 2025, which will raise its price by over 80%, making many industries, shipping services and independent power producers (IPPs) unviable. In a letter sent to SIFC, OCAC Chairman Adil Khattak said that the advisory council and its member companies had expressed deep concern and protested over the imposition of petroleum levy of Rs82,077 per metric ton on furnace oil through the Finance Act 2025. "This levy, in addition to the Climate Support Levy of Rs2,665 per metric ton, poses a serious threat to the overall business environment," he said. "While we acknowledge and appreciate the support extended by the Special Investment Facilitation Council in securing an interim relief from the government – through the recovery of inadmissible general sales tax (GST) on petroleum products via the inland freight equalisation margin (IFEM), this remains a temporary measure with limited scope," he said and demanded a sustainable solution by restoring the taxable status of currently exempt petroleum products, ie, motor spirit (petrol), high-speed diesel (HSD), kerosene oil and light diesel oil (LDO). He called SIFC's continued support pivotal until full and permanent resolution of the matter. Khattak stated that the abrupt imposition of levies on furnace oil without prior consultation with the industry reflects a complete disconnect from the economic and operational challenges being faced by the sector. Furnace oil is a deregulated product and its pricing is governed by market forces. It is mainly used to meet energy needs of the domestic industry. "The imposition of such a substantial fiscal burden will have widespread and adverse financial repercussions across multiple business sectors, threatening their viability and long-term sustainability," he remarked. OCAC said that the new levies would increase furnace oil prices by approximately 80%, making its use economically unviable for key industries such as cement, shipping, textile, glass, tyre manufacturing, large-scale industrial units, foundries and other sectors reliant on boilers and furnaces (commonly referred to as general trade). This drastic price increase would eliminate domestic furnace oil demand and cause a sharp decline in industrial activity, potentially resulting in partial or complete operational shutdowns, especially where no viable fuel alternatives exist, it warned. In the letter, OCAC underscored that this measure was in direct contradiction to the government's stated commitment to promoting domestic manufacturing. Rather than enhancing revenues, it is likely to significantly reduce or eliminate furnace oil sales within the country, thereby slashing associated sales tax revenues and undermining industrial competitiveness. "It will also defeat the objective of collecting the envisaged revenue through the imposition of petroleum and climate support levies." In the absence of domestic demand, the advisory council said, local refineries would be forced to export furnace oil at a considerable financial loss. This will further strain the financial condition of Pakistan's refining sector and compromise its sustainability. It pointed out that the government had recently renegotiated tariffs with furnace oil-based IPPs but the new levies would substantially increase fuel costs, pushing those plants lower on the merit order and rendering them inactive. "This will nullify the gains from recent renegotiations while still obligating the government to make capacity payments, effectively increasing the burden on national finances." In light of the above, OCAC urged SIFC to intervene and recommend the withdrawal of petroleum and climate support levies on furnace oil. It believes this will help restore policy consistency, support critical sectors of the economy and uphold the principles of fair and sustainable economic development. "We remain committed to engaging in constructive dialogue and are available for an urgent meeting to further discuss this matter in the national interest," the OCAC chairman added.
