No demands of IPPs without forensic auditing first: EFP President

Karachi, June 22, 2020: Ismail Suttar, President of the Apex Body of Manufacturers, The Employers Federation of Pakistan (EFP), has endorsed incumbent Government’s decision to reconsider launching of electricity markets in Pakistan, stating that it will induce competition in the power sector and enhance the efficiency of the energy supply chain.

In a Statement, EFP president said the CPPA-G back in 2014, had thought of it but the idea got buried underneath heap of other economic and political issues. Launching an electricity market model is indeed a positive development towards a sustainable future of the power sector.

He further said that last year in 2019, the EFP in its Federal Budget Proposal 2019-20 had already emphasized on formation of a wholesale electricity market to effectively tackle the circular debt crisis. In the middle of an escalating pandemic, where the welfare of the populace should be the central focus of any upcoming policy decisions, the increase in electricity tariffs without holding IPPs accountable is a sheer disappointment.

“The recent decision of the Government of passing the Rs. 1.9 trillion circular debt burden onto the consumers in the form of higher tariffs, which will only add to the misery and misfortune of the common man. The status quo will not improve unless immediate forensic audits of IPPs are comprehensively carried out”, Ismail Suttar criticized.

The EFP president added that in consonance with the recent demand by the IPPs to revert to pre-Finance Bill 2019 provision on Income Tax Ordinance 2001 regarding policy on tax on dividends, he said nothing can be agreed on without forensic auditing first.

EFP Chief explained that the objective was never to incentivize power purchasers, rather it was to create a lucrative business climate for power producers. In pre-Finance Bill 2019 clauses of Income Tax Ordinance 2001, dividends are mentioned as a pass-through item but this is incorrect because this exclusive applies to With-Holding Tax (WHT).

“Pakistan does not have any electricity market yet, so the Independent Power Producers (IPPs) must follow the rate of returns set by the government and only return on equity paid in the form of dividends must hold. Any surcharges above 7.5 percent will be a blow to investors of power producers”, he added.

Ismail Suttar said that the only way forward is to call for an impartial forensic audit of the IPPs, otherwise, no payments should be made and no demands be accepted. This assertion is for the greater good of the economy of Pakistan and the sustenance of a common man.

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