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Shocking Revelations Related to Electricity IPPS | Khaqan Najeeb Detail Analysis
Shocking Revelations Related to Electricity IPPS | Khaqan Najeeb Detail Analysis
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00:00Welcome back, if you are fed up with your electricity bill and now your electricity bill actually takes up a large part of your cost of living, then do watch this segment.
00:11According to Zarai, some facts have come to light regarding the destruction of IPPs in the country's economy.
00:16Zarai has claimed that some IPPs have received billions of rupees from the government of Pakistan without generating electricity due to a wrong contract.
00:24IPPs were contracted wrongly by the government of Pakistan.
00:29In Bangladesh and Vietnam, IPPs were found to be four times more expensive than those in Pakistan.
00:35In Pakistan, despite coal reserves, IPPs are relying on imported fuel such as high-speed diesel and renewable coal to generate electricity.
00:43IPPs have not generated as much electricity as the imported fuel has generated and have also received billions of rupees from the government.
00:49Due to the actions of IPPs, expensive electricity is being generated.
00:53According to Zarai, IPPs have been denied forensic audits despite the insistence of the government of Pakistan.
00:58IPPs have received billions of rupees from the government of Pakistan in the guise of taking care of plants, whereas a fourth of that amount is not spent on taking care of plants.
01:06Surprisingly, the government is also tolerating the insurance of IPPs, whereas the government has also tolerated the expenses of installing IPPs in the beginning.
01:13The government has also provided facilities to the owners in the guise of tax duty insurance, but despite tolerating all the expenses,
01:20the government of Pakistan will not have any ownership of the plants after the term of the contract.
01:25According to Zarai, most of the owners of IPPs are local, but the contract has been made in the name of some foreign countries.
01:31In the program, we have with us Mr. Khaqan Najeeb, an expert in economics.
01:34Mr. Khaqan, it is a good thing that there is a debate in the public sphere that when people are giving such big bills, they should know why these bills are coming in excess.
01:41Why are Pakistanis forced to pay the most electricity bills in the entire region?
01:45We have come to know that this was a bad negotiation at the time of the negotiation.
01:51First of all, tell us, what era are we talking about?
01:55Has this been a bad negotiation throughout?
01:57Is there a certain era in which it has been mismanaged?
02:01Tell us a little bit about the background of this, why are we paying so much electricity bills?
02:07Mr. Maria, let me sum it up for you.
02:09Till 1994, electricity was being made by Wabda, dams were being made, Mangla was made, Tarbela was made.
02:15In 1994, there is a shortfall in electricity and to meet it, we go to IPPs, i.e. Independent Power Projects on foreign advice.
02:25And the surprising thing is that we give 17% guaranteed return on equity in dollar terms.
02:33Number two, the surprising thing is that we guarantee that the government will buy all the electricity.
02:40And there is no price discovery in this as to at what price it should be.
02:45And that PPI was also an institution at that time and whatever tariff they gave them,
02:50because of this, there were issues of transparency and because of that, there were issues of over-invoicing.
02:56Which means that if a 100 rupee thing was invested in 150 rupees, then the 20% that I had to invest,
03:02I already took out 30 rupees because the 100 rupee thing was invested in 150 rupees.
03:07And then he kept earning 5 dollars on that 30 rupees.
03:11That is how this has played out.
03:13In 2002, we did one more miracle.
03:15We did that, I think it was not seen very prudently.
03:20We also told the local domestic IPPs that to bring them at par with the foreign IPPs,
03:27we will also give them dollar-based return.
03:30100 rupees dollar and today 285 rupees dollar.
03:34You can guess why your bill is coming more.
03:38Now let's go ahead.
03:39Now you reach in 2015.
03:42I had also said at that time that get their heat rate audited.
03:45I was present at the government table.
03:48But you know, that was not to be done.
03:50You also mentioned.
03:52Then I said that let the country load shed 2 to 4 hours a day.
03:57And give it to the whole industry and not to the domestic.
04:00I said this because we have set up a capacity of 40,000 megawatts from 2015 onwards.
04:06And we sell 30,000 to 35,000 in summers.
04:11In winters, we are not able to sell more than 8,000 to 10,000.
04:15And we are doing capacity payment of 40,000 megawatts.
04:19And that too was negotiated in such a way that we have to pay that debt upfront in 10 years.
04:25That price is around 25 years.
04:27This is the story of IPPs.
04:29I have said again and again that there was no price discovery.
04:32Nor did we decide that we also planted diesel plants.
04:36While the countries that make diesel, they themselves do not plant on diesel.
04:39Because it is very expensive to do that.
04:42In this way, the gas was depleted locally.
04:46And one day we realized that we will have to run the plant on imported gas.
04:50When this discovery happened, we realized.
04:54This is the IPP story.
04:56I will say only one thing.
04:57IPPs are a part of that whole issue of energy governance.
05:02In which the country is stuck at the moment.
05:04Comprehensively, it requires a new organization.
05:07There are two or three big questions that arise in this.
05:10The first question is that when we will renegotiate it, re-evaluate it.
05:13It is a legal matter.
05:15The agreements that you have made with them.
05:18International law will also be applied on it.
05:21The matter will go to litigation.
05:23So how long are we bound to honor these agreements?
05:28And what about renegotiation?
05:30Instead of doing it with goodwill of the heart.
05:32We are Pakistani, we have to serve the nation.
05:35Is there any other way?
05:38So the story here is that there were agreements.
05:41In which there was over-invoicing.
05:43In which heat ray testing was never done.
05:45In which it is certain that the state is not strict at the moment.
05:50Two things went wrong.
05:52One, we said that we will give the return in dollars.
05:55We did not even realize that you will not have dollars to give.
05:59So our research was also weak.
06:02And whenever we negotiated with the private sector.
06:04They got that benefit from us.
06:06Because the mindset is rent-seeking private sector in Pakistan.
06:10So be very clear.
06:11What can we do now?
06:12So here is very very clearly how we move forward.
06:15The IPPs of 1994 have spent 25 years of their lives.
06:20We have just renewed an IPP.
06:22I don't know why we did it.
06:24It shouldn't have been done.
06:25Take and pay them.
06:29I think you will save 40-50 paise in the tariff.
06:324-5 of 2002 are left.
06:35Those who have a life.
06:37Look at them too.
06:38If someone is going to give 80-100 billion.
06:40Give it and finalize it too.
06:42I think you can save between 1 and 1.5 rupees.
06:47Back of the envelope.
06:48See in detail again.
06:50So take them out of the system.
06:52Now come to the real issue of 2015.
06:5535% payment is going to the CPEC plants.
06:58This debt will have to be re-profiled.
07:01This means that we will have to say amicably.
07:04Either you take our debt on 20 or 25 years instead of 10.
07:09If you can't do this.
07:10Then I will take this money from Bank of Maria and refinance it.
07:15And Bank of Maria will give me a credit of 25 years.
07:18I mean State of Pakistan.
07:20This is the second solution.
07:21You should do this.
07:23The third thing is that 50% is still with the government.
07:27Look at the return on equity.
07:29If there is any scope.
07:30Then get it.
07:32The local IPPs.
07:34Moral persuasion and coercion.
07:36Both will work.
07:37But on a technical way.
07:38Do one thing.
07:40Buy data from the world.
07:42When in South Asia, Vietnam.
07:45When these plants were found compatible.
07:47What was the pricing?