Prime Minister Shehbaz Sharif addressing the federal cabinet in Islamabad, on October 9, 2024. — Screengrab/Geo News
After extended deliberations with the authorities, the five independent power producers (IPPs) have agreed to cancel their power purchase agreements (PPAs) with the federal government “voluntarily”, Prime Minister Shehbaz Sharif said on Thursday, providing inflation-hit consumers with a relief of Rs60 billion annually.
“By voluntarily agreeing to terminate their contracts with the government, these five IPPs prioritised the nation’s interests over their own. The take and pay system has ended for them,” the premier said addressing the Cabinet.
The federal government has been under immense pressure to reconsider its power purchase agreements (PPAs) with the IPPs following outcry across the country as the addition of capacity payment charges inflated the power bills beyond the affordability of the inflation-burdened masses.
The PM said that in the first phase, five IPPs were ending deals with the government; however, revision of PPAs with other IPPs would gradually reduce the tariff further, saving the national exchequer Rs411 billion a year, creating more fiscal space for the cash-strapped country.
PM Shehbaz said: “The rate of inflation was more than 30% [in the same month during the previous year], it now stands at 6.9%.”
The prime minister commended the five IPPs, stating they were the first raindrops in the effort to bring relief to the public.
An official, who was part of the task force on the power sector, told The News that the modalities were being settled, and once finalised, all five IPPs would sign the documents to terminate the contracts.
The development came after PM Shehbaz’s administration, last month warned the IPPs’ owners of “consequences” over failure to voluntarily terminate the PPAs.
“The entire cabinet, including me, is grateful to these IPP owners,” he added, further mentioning that the task force established for the reform of the power sector and the members of the federal cabinet deserve praise for this effort.
He also highlighted the record increase in remittances from overseas Pakistanis. “Record remittances of $8.8 billion in the last quarter reflect the confidence of overseas Pakistanis in government policies.”
During the cabinet meeting, the details of the agreement between the task force and the owners of the IPPs — including Hubco, Lalpir, Saba Power, Rousch Power, and Atlas Power — and the process of concluding the agreements with them were presented before the cabinet.
Out of these IPPs, Rousch Power was established under a build-own-operate-and-transfer agreement, which will be privatised by the Privatisation Commission after the transfer of its ownership to the government.
The ownership of the other four IPPs will remain with their owners, while no payment will be made by the government after the termination of the contract.
Govt power deal ends prematurely, says Hubco
Meanwhile, the country’s biggest private utility, Hub Power Company Ltd, unveiled on Thursday the premature termination of a pact for the government to buy power from its generation project.
The government and market operator the Central Power Purchasing Agency (CPPAG) agreed to settle the company’s outstanding receivables up to Oct 1, it told the Pakistan Stock Exchange in a notice.
Last month, Minister for Energy (Power Divison) Awais Leghari stated that the government was re-negotiating deals with independent producers to rein in electricity tariffs as households and businesses buckle under soaring energy costs.
The company said its board approved an accelerated expiry date of October 1 for the deal, instead of an initial date of March 2027, in an action taken “in the greater national interest”.
A decade ago, Pakistan approved dozens of private projects by independent power producers (IPPs), financed mostly by foreign lenders, to tackle chronic shortages.
But the deals, featuring incentives such as high guaranteed returns and commitments to pay even for unused power, ultimately resulted in excess capacity after a sustained economic crisis slashed consumption.
Short of funds, the government has built those fixed costs and capacity payments into consumer bills, sparking protests by domestic users and industry bodies.
The need to revisit power deals was a key issue in talks for a critical staff-level pact in July with the International Monetary Fund (IMF) for a $7-billion bailout.
Pakistan has begun talks on reprofiling power sector debt owed to China and structural reforms, but progress has been slow. It has also vowed to stop power sector subsidies.
ISLAMABAD – The Competition Commission of Pakistan (CCP) has approved the joint acquisition of Uch Power (Private) Limited and Uch-II Power (Private) Limited by Sapphire Fibres Limited (Acquirer 1) and Mindbridge (Private) Limited (Acquirer 2).
The acquisition, formalized through a Sale and Purchase Agreement with UPLHC-I Limited (Seller 1), UPLHC-II Limited (Seller 2), and International Power Uch Holdings B.V. (Seller 3), will transfer 100 percent of the shares of Uch Power I and Uch-II Power to the acquirers.
The total cost for the acquisition includes a significant investment for both Uch Power I and Uch Power II. Both Sapphire Fibres Limited and Mindbridge Private Limited will equally share ownership, holding a 50% stake in each of the power plants.
Sapphire Fibres, a publicly listed company, operates in textiles manufacturing and power generation through its subsidiary, Sapphire Electric Company. Mindbridge, a private IT services provider, will now enter the power generation sector with this acquisition.
Uch Power and Uch-II Power are active in Pakistan’s thermal power sector, with gas-powered plants. The acquisition will increase Sapphire Fibres’ market presence in thermal power generation, while Mindbridge will mark its entry into the power generation industry through the proposed transaction.
The CCP’s analysis has determined that the relevant product market for this transaction is ‘Thermal Power Generation – Independent Power Producer’ within Pakistan. The acquisition will not lead to market dominance by the Acquirers, ensuring continued competition in the sector.
Energy Minister Awais Leghari addresses press conference in Islamabad, October 10, 2024. — Radio Pakistan
ISLAMABAD: The federal government is aiming to cut the electricity tariff by up to Rs10 after the termination of power purchase agreement with five independent power producers (IPPs) which it believes would save the national exchequer Rs411 billion.
“We will reduce the power tariff after mutual consultation with power generation companies,” Energy Minister Awais Leghari said while addressing a press conference after federal cabinet’s meeting in Islamabad.
Prime Minister Shehbaz Sharif, earlier in the day, announced that five IPPs have “voluntarily” agreed to cancel their power purchase agreements with the federal government, a move that will save the government Rs60 billion annually.
The high cost of electricity has become a contentious political issue, with opposition parties leveraging public dissatisfaction to criticise the incumbent government’s handling of the energy sector and agreements with the IPPs.
The burden of high electricity tariffs falls disproportionately on the middle and lower-income segments of society, fueling public outrage and eroding trust in the government’s ability to manage the economy.
Analysts noted that a successful renegotiation with both local and international IPPs would drastically reduce tariffs, boost industrial competitiveness, and increase public trust in the government’s ability to effectively manage the economy.
Giving details regarding the development, the energy minister said that the government had surveyed to ascertain which plants are not needed anymore.
“We initiated talks with five IPPs and studied the power agreements,” he said, adding that they concluded with mutual consultation.
“The decision would provide Rs60 billion annual relief to the electricity consumers and cumulatively save Rs411 billion to the national exchequer,” Leghari said.
Hoping to achieve the target of reducing the power tariff by Rs 8-10 per unit in a few months, the minister said the government was undertaking various measures to ease the burden on the masses.
He also thanked Chief of Army Staff (COAS) General Asim Munir for his assistance in re-negotiating the agreements. “We will now look forward to working with remaining IPPs,” he added.
The energy minister also mentioned the establishment of an Independent System and Market Operator (ISMO), which he termed a “major win” for his ministry. “After its operationalisation, consumers will be able to buy electricity like shares,” he said.
A day earlier, the Cabinet Committee on Energy (CCoE) approved the establishment of ISMO, an independent multiplayer market, for power generation and purchase to create a competitive environment and gradually end the government’s role as a sole purchaser of electricity.
“We are creating an independent environment for the sale and purchase of electricity,” Leghari said, adding that the power purchasers will not be dependent only on the Central Power Purchasing Agency (CPPA-G).
Furthermore, he said the government was considering introducing a programme, which he said would increase the usage of electricity in winter. “In this regard, a decision will be made after taking all stakeholders into confidence,” he added.
Finance Minister Senator Muhammad Aurangzeb (left) and FBR Chairman Rashid Mahmood Langrial address a press conference to brief FBR study regarding sales tax evasion in Islamabad on October 10, 2024. — PID
Federal Minister for Finance and Revenue Senator Muhammad Aurangzeb on Thursday highlighted a massive sales tax evasion worth Rs3.4 trillion out of a total Rs7 trillion tax theft in different sectors of the economy.
Aurangzeb was addressing a press conference along with the Federal Board of Revenue (FBR) Chairman Rashid Mahmood Langrial to discuss a study conducted by FBR on sales tax evasion.
The study found that only 14% out of 300,000 manufacturers liable to register have done so, and many registered entities misreport turnover, claim excess input tax, and use fake invoices.
Sales Tax in Pakistan is collected through VAT mode, relying on businesses to collect tax from buyers. However, this trust has been breached on a massive scale, the minister said and shared findings from five sectors including iron and steel, cement, beverages, batteries, and textile.
He said malpractices were widespread, with most entities claiming excess input tax.
In the iron and steel sector, 33 large businesses, representing over 50% of total sales, evaded sales tax by claiming Rs29 billion in excess input tax, mainly through scrap metal and coal purchases.
Likewise, in the battery sector, six active cases, representing 99% of total sales, claimed Rs11 billion in excess input tax, primarily through lead purchases while in the cement sector, 19 active cases claimed Rs18 billion in excess input tax in FY23-24, mainly through coal purchases.
In addition, the beverages sector with 16 active cases, representing 99% of aerated water sales, claimed Rs15 billion in excess input tax, mainly through sugar, plastics, and services purchases.
In the textile sector, with 228 active cases claimed Rs169 billion in excess input tax, mainly through services, chemicals, coal, and packaging purchases.
Detailing steps to combat tax evasion, the finance czar said that the government has intensified enforcement measures, including arrests and criminal cases, resulting in a significant decrease in fake input tax claims in FY23-24.
However, massive evasion persists, and more measures are being planned to curb it.
He said that the apex taxation body has identified evidence of tax fraud in various sectors, including 11 battery sector cases, 897 iron & steel sector cases, and 253 beneficiaries of fake input claims on coal purchases.
Those involved face arrest and imprisonment of up to 10 years, heavy penalties, and fines.
On the occasion, the FBR chairman emphasised that input tax adjustment fraud was a serious issue, warning CFOs to refrain from signing incorrect returns, especially before the October 15 deadline. Those involved in tax evasion will face consequences.
Bank Alfalah to issue 150,000 free debit smart student cards for Virtual University students
A significant step towards modernizing e-banking solutions for students was taken as a delegation from Bank Alfalah Ltd visited the Virtual University of Pakistan’s Head Office in G-5, Islamabad. The visit marked the signing ceremony of agreements for the Integrated Payment Gateway (IPG) and Payroll systems.
The delegation from Bank Alfalah was warmly received by the Rector of Virtual University, Prof. Dr. Arshad Saleem Bhatti, and his team. During the ceremony, Rector, VU acknowledged the importance of these agreements, highlighting Virtual University’s commitment to embracing cutting-edge financial solutions. The new initiatives, particularly concerning IPG and Payroll, will streamline financial transactions and enhance ease for students and staff.
Discussions also focused on several potential collaborative efforts between Bank Alfalah and Virtual University, including the implementation of the 1-Bill system and the introduction of a debit card facility for students. These cards will not only serve as debit cards but also act as smart student ID cards, benefitting over 150,000 students. In addition, both parties explored opportunities for scholarships, sponsorships, and other avenues of collaboration to support students’ financial needs.
Dr. Arshad Saleem expressed enthusiasm for the long-term partnership between Virtual University and Bank Alfalah, emphasizing how these new facilities will enhance convenience for students, particularly in terms of fee payments. Students will now be able to pay their fees through the Integrated Payment Gateway, the Alfalah App, and Alfalah Transect.
The Virtual University delegation included: Prof. Dr. Arshad Saleem Bhatti, Rector, Mr. M. Ashraf Ali Khan, Director Finance, Prof. Dr. Ather Azim Khan, Registrar, Mr. Ehsan Puri, Director ICT, Dr. Faisal Tehseen Shah, Controller of Exams, Prof. Dr. Mohsin Javed, Dean, Mr. Aamir Hasan Khan, Director P&D, Mr. Muhammad Sajid Gill, Additional Director Finance
Representing Bank Alfalah Ltd were:Mr. Husnain Zaigham, Business Head North, Mr. Akmal Khattak, Regional Business Head, Mr. Umair Hassan, Area Manager, Mr. Bilal Munir, Regional Sales Manager, Employee Banking, Mr. Sohaib Malik, Senior Manager, Retail Cash Management, Ms. Mavera Salim, Branch Manager
