Chamber of Commerce petition Supreme Court to nullify policies governing IPPs

ISLAMABAD: The Chamber of Commerce and Industry has petitioned the Supreme Court to nullify the 1994, 2002, and 2015 policies governing independent power producers (IPPs).

The Chamber argues that these policies have allowed for the disposal of state resources without competitive bidding or rational justification.

Advocate Faisal Naqvi, who filed the petition, requests that the Supreme Court declare that the government and its agencies should not profit from providing essential services like electricity to the public.

The petition also calls for a comprehensive forensic audit of all IPPs and urges the government to enforce the 2020 report fully. This includes recovering excess profits from IPPs, renegotiating agreements from “take or pay” to “take and pay,” correcting anomalies in the calculation of internal rates of return (IRR), and removing provisions that permit the dollarization of amounts not invested in foreign currencies.

The petition asserts that under Article 9 of the Constitution, the government is responsible for ensuring electricity supply to citizens at the lowest possible cost.

The petition asserts that Pakistan’s ongoing economic crisis is largely due to issues in the power sector. It highlights that Pakistan is expected to pay around Rs3.58 trillion to electricity-generating companies this year.

Of this amount, approximately Rs2.63 trillion is anticipated to be recovered, while the remaining portion will be subsidized by the government, adding to the existing circular debt.

The petition notes that Pakistan’s installed generation capacity is 45,885 MW, with state-owned entities accounting for 23,860 MW (52%) and independent power producers (IPPs) contributing 22,043 MW (48%).

Despite this, the peak summer demand is about 30,000 MW, and winter demand is around 12,000 MW. Additionally, IPPs are set to add another 7,460 MW by 2032, on top of 11,550 MW from government projects such as the Dasu Hydroelectric Project and the Diamer-Basha Hydroelectric Project.

The petition argues that the state cannot enter into contracts arbitrarily; such contracts should be conducted openly, fairly, and transparently.

It criticizes the government’s failure to conduct a comprehensive forensic audit as a serious neglect of its duty to protect citizens’ interests. The 2020 report detailed IPPs’ violations and excessive profits, yet the budget for a proposed forensic audit was never approved.

The petition contends that even if the government has the freedom to make contracts outside competitive bidding, it should not permit private entities to make excessive profits from essential services.

Additionally, the Lahore High Court Bar Association (LHCBA) has also petitioned the Supreme Court to declare the 1994 Power Generation Policy unconstitutional and to review other related policies. The LHCBA has requested details on IPP ownership and operations and contends that the agreements with IPPs are non-transparent, illegal, and violate Article 18 of the Constitution.