Pakistan is going through an economic crisis further aggravated by political crisis. Deep study reveals that all the crises are intertwined with Corruption and the IPPs are the mother of corruption, hence the root of political and economic instability, inflation is making lives of people miserable. The circular debt is around USD 16 billion and increasing,(created through corruption of governments from 1994-2018) whereas the Defence budget is USD 8 Billions, external debt USD 116 billion.(20021-22). It is not an overstatement to be taken lightly, the statistics and data cannot be ignored. One need not be an economist or require the brain and wisdom of Plato, Aristile or Einstein to understand simple straight information. However the politics have placed a thick haze and overshadowed the real issue.
The PPP and PML-N governments who contracted IPPs conducted inquiries into the matter as eye wash and failed to take solid action to reduce the miseries of people and state. However, the PTI government under Imran Khan, conducted an inquiry in 2020 and renegotiated contracts with most PPs, claiming that it would result in savings of $3 billion. However, after the controversial regime change operation in April 2022, the corrupt Shahbaz Sharif of PML-N (supported by PPP and other corrupts) became the PM and formed a government with full backing of the deep state. The 'the fox guarding the henhouse."
The negative effects of Independent Power Producers (IPPs) in Pakistan are numerous. The high cost of electricity from IPPs has resulted in debt trap (circular debt) crisis, increased tariffs for consumers, costly subsidies, lack of investment in transmission systems, lack of competition, energy crisis, and non-competitive industries. Load shedding continues despite surplus electricity contracted and payment of unused energy. These negative effects have had a significant impact on the economy and people of Pakistan. The PTIs government conducted an inquiry and negotiated deals with IPPs but the anti corruption government was removed mysteriously. It is really very difficult if not impossible to root out corruption through IPPs. This brief is an endeavour to highlight the salient aspects of this important issue which is the root cause of political instability and economic crisis.
[https://bit.ly/Pak-IssueNumber-1]
2. Transmission capacity of the electricity infrastructure: 23GW (23,000 MW)
3. Total installed capacity: 40 GW (40,813 MW) (excluding K-Electric)
The 17 GW (17813MW) is surplus as transmission system capacity is 23GW.
Why buy extra electricity at exuberant cost which cannot be consumed?
Normal logical course should have been:
1. Enhance Transmission capacity from 23GW to 28.2 GW (to meet peak demand) and later more to cater for increase in demand.
2. Make an effort to first arrange additional electricity to meet the peak demand of 28.2GW, along with improvement in the transmission system, [later more electricity would be required to cater for the increase in demand]
However, instead of 23 GW (Transmission capacity), expensive IPPs were contracted on strange terms favourable to IPPs [pay on installed capacity instead of actual consumption, without keeping the actual demand in mind, thus increasing installed capacity to 40.8GW.
The extra 17GW cannot be used due to the transmission system's limited capacity of 23GW, moreover we are also paying IPPs on installed capacity on actual production/ consumption. So people of Pakistan are paying for the electricity they use and 17GW (40%) which is not being produced or used. This is straight going to the pockets of IPPs with no production cost. What a business?
It is logical to conclude that this senseless decision was made for kickbacks and nothing else.
The nation is bearing a burden of circular debt of 5 Trn. Moreover why IPPs are paid according to installed capacity and not actual consumption of units?
Rs99bn were paid to around hundred plants in capacity payments in Oct-Dec 2022, despite most of them operating at below 20pc (Dawn 13/4/23). So around Rs.400Bn is being paid annually while using much less electricity. So even if people use less electricity or don't use electricity the IPPs will have to be paid according to their installed capacity and amount extracted from consumers on various pretexts.
It's nothing but extortion and plundering of people by the government to fulfil their corrupt deals.
Around 100 plants paid Rs99bn in capacity payments in Oct-Dec despite most of them operating at below 20pc (Dawn 13/4/23)
https://www.dawn.com/news/1747377
A Parable
If a car has a tank with capacity of 50 litres, and the owner already has 40 litres petrol in it. He needs 10 litres more to fill the fuel tank.
But instead of buying 10 litres to top up he buys 50 litres at higher rates on credit, knowingly that after putting 10 litres in available space, he does not have storage for an additional 40 litres and that he will also have to pay for it whether he can use it or not. He must be insane, crazy, and need immediate treatment for mental disorder.
Let's take a similar case of IPPs (Independent Power Producers) in Pakistan. To meet the electric power shortage and to end load shedding IPPs were contracted in the 1990s. Surprisingly iit is found that against available transmission capacity of 23GW, IPPs were contracted to make total power available 40GW. [extra (17GW, 40%, figures rounded off)] till 2021.
Common sense (not very common) raises some questions:
What will happen to excessive 17GW (40% extra) electricity?
Why to pay for an expensive 17GW, which cannot be utilised due to transmission limitation?
How will the poor citizens bear the cost of this extra (40%) electricity and why?
What special interest rulers and administration have in such a strange anti public, anti state, irrational deals?
The national economy has been destroyed (Rs.5 Trn circular debt), expensive electricity making products non competitive in market, hence industry, exports destroyed with no end in sight.
Can it be called a normal decision?
Does it appeal to commonsense?
If it does not , how can such a decision be taken at the national level for Pakistan?
Such people can be either insane or highly corrupt.
They are not insane, once we look at their flourishing private business, excessive wealth here and abroad and their politics. So they can only be termed as corrupt.
PPP and PML-N governments conducted inquiries which was just eye-wash, not solid action was taken to reduce the miseries of people and state, hence now 5 Trn debt.
PTI Government Inquiry and Renegotiated deal with IPPS
In December 2020, the PTI government led by Imran Khan after conducting an inquiry negotiated with IPP and announced that it had successfully renegotiated contracts with 46 IPPs, resulting in savings of approximately $3 billion for the national exchequer. The government claimed that the renegotiated contracts would help reduce the cost of electricity for consumers and improve the financial sustainability of the power sector.
The PTI government was removed through a controversial, mysterious regime change operation in April 2022. The corrupt Shahbaz Sharif, who was being indicted in court for corruption and money 14 Bn, laundering became PM, on the date of indictment, the witness against him and the inquiry officer died of a heart attack mysteriously. Besides other reasons this revision of deal with IPPs could be an important factor. The IPPs lobby is a powerful mafia.
The IPPs got a stay order from court. Rs 99bn were paid to around hundred plants in capacity payments in Oct-Dec 2022, despite most of them operating at below 20pc (Dawn 13/4/23). End of First sincere effort to end power crisis. Read more below ... or <click here>
CAPITALISM’S ACHILLES HEEL: Dirty Money and How to Renew the Free-Market System RAYMOND W. BAKER ; Page 76-85 on Pakistan: Bhuttos & Sharif's
Summary
In his book, Baker discusses how corruption and illicit financial flows have impacted the economic development of Pakistan, particularly during the rule of the Bhutto and Sharif families. He argues that the corruption and rent-seeking behaviour of these families have undermined the rule of law, distorted economic incentives, and contributed to the country's economic and political instability.
Baker notes that the Bhutto and Sharif families have been involved in a range of corrupt activities, including embezzlement of public funds, tax evasion, and money laundering. He also discusses how these families have used their political power to enrich themselves and their close associates, while neglecting the development of the country's infrastructure and human capital.
Baker argues that the culture of corruption and impunity in Pakistan has contributed to the country's economic stagnation and social inequality. He calls for a renewed commitment to transparency, accountability, and the rule of law to help combat corruption and promote sustainable economic growth in Pakistan.
Overall, Baker's analysis highlights the challenges facing the Pakistani economy and political system, and the need for structural reforms to address corruption and promote economic development.
Read full: https://bit.ly/DirtyMony
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