THERE has been a heated debate lately over the ongoing electricity crisis and exorbitant increase in tariffs that have not only added to the woes of the people, but has also made virtually impossible for many of them to have two square meals every day.

To know the actual causes of this rather daunting crisis, it is vital to have an insight into the working of independent power producers (IPPs). In essence, cap- acity payments to IPPs have often played havoc with the economic wellbeing of the country. As such, in the 2023-24 fiscal, for instance, capacity payments amounted to 71 per cent of the total cost, while energy charges accounted for the remaining 29pc.

Unfortunately, no effort has been made to contain or eliminate these payments which run into trillions of rupees. An amount of Rs8.3 trillion has been paid to IPPs in the last 10 years, and, if it remains unchecked, an amount of Rs2.1 trillion will be payable during the 2024-25 fiscal, which may be more than what the country spends on its defence.

Apparently, renegotiating contracts with IPPs does not have a significant chance of success. As such, innovative and out-of-the-box solutions have to be explored and implemented. Instead of paying for the unused energy as capacity payments to the IPPs, the excess power should be provided at cost to select industrial, agricultural, commercial and domestic consumers who should be pre-selected on the basis of merit.

For example, export-oriented industries should be facilitated so as to enable them to be competitive with regional economies. Similar consideration should be given to agricultural consumers to boost their produce for domestic as well as export purposes. High electricity tariffs have made the lives miserable for domestic consumers, who also need to be comp- ensated by supplying cheaper energy at cost, if not free.

As things stand, in case of failure to focus on finding practical solutions to this lingering issue, the power sector will continue bleeding under the hefty capa-city payments to the IPPs for a very long time. Now, let us buy all the unused energy from the IPPs and compensate the consumers by supplying this energy at cost with a view to ultimately helping the national economy. The sooner this is done, the better. Let us facilitate lives.

Riaz Bhutta
Islamabad

Published in Dawn, August 10th, 2024