ISLAMABAD: Some Independent Power Producers (IPPs) have allegedly collected billions of rupees from the government without generating electricity, due to flawed contracts that are now burdening the country’s economy, it was learnt on Sunday.
Sharing shocking revelation regarding the role of IPPs in Pakistan, sources in the industry alleged that some IPPs have collected billions of rupees from the government without generating electricity, due to flawed contracts that are now burdening the country’s economy.
Sources also alleged that IPPs have been benefitting from contracts that were poorly negotiated, leaving the government to bear the brunt of financial consequences. In stark contrast to similar projects in Bangladesh and Vietnam, wind power plants in Pakistan were reportedly installed at four times the cost, pointing to significant over-invoicing, they added.
As per the sources, despite the availability of domestic coal reserves, many IPPs have continued to rely on imported fuels, such as high-speed diesel and coal, for power generation. This reliance on expensive, imported resources has led to higher electricity costs, further straining the economy. It has also been revealed that some IPPs did not generate as much electricity as they claimed while importing these fuels, yet they received billions in government subsidies.
Furthermore, the sources suggested that IPPs are resisting calls from the government to undergo a forensic audit o f their financial practices, raising concerns about transparency and accountability in the sector. Despite the government’s push for greater scrutiny, the IPPs remain reluctant to open their books, leading to further speculation about mismanagement and potential financial misconduct, said sources.
It is also learnt from sources that the government has reportedly paid billions of rupees to the IPPs for plant maintenance. However, only a fraction of these funds is being used for the actual upkeep of the facilities. Shockingly, it has also come to light that the government is bearing the insurance costs for the IPPs, alongside the initial setup costs. Even though the government is covering these significant expenses, the plants will not become government property once the contracts expire.
These contracts, designed in the name of foreign entities, have allegedly allowed local owners to benefit from advantageous terms that were not in the best interests of the country. The sources claimed that this deliberate structuring of contracts has deprived Pakistan of the financial benefits associated with these power projects.
It is relevant to mention that the efforts to get an official response from Federal Power Minister Awais Leghari and the Secretary of the Power Division were unsuccessful.
It is pertinent to mention that the revelations call into question the long-term viability of the IPP model in Pakistan and highlight the urgent need for reforms in the energy sector. With billions of rupees at stake, it remains to be seen how the government will respond to these allegations and whether stricter regulatory oversight will be imposed on IPPs in the future.
