By Commerce Reporter
LAHORE: Lahore Chamber of Commerce and Industry (LCCI) Senior Vice President Tanveer A. Sheikh has expressed serious concern over approximately Rs2.935 trillion paid to Independent Power Producers (IPPs) during the first 11 months of the last financial year, warning that the enormous burden on the power sector is undermining industrial competitiveness and economic growth.
Sheikh said the magnitude of the payments required urgent attention from policymakers as Pakistan’s businesses and industries were already struggling with high electricity tariffs, rising production costs and increasing competition in domestic and international markets.
He said the financial structure of the power sector had consequences extending well beyond electricity generation because its costs ultimately affected businesses, manufacturers and ordinary consumers.
“Electricity is one of the most important inputs for industry, and when its cost remains excessively high, the entire economy suffers,” Sheikh said.
He urged the government to undertake a comprehensive and transparent review of IPP agreements, capacity payments and the country’s overall power-purchasing mechanism to determine where costs could be rationalised without compromising legitimate contractual obligations or energy security.
The LCCI senior vice president stressed that any review should be conducted transparently and strictly in accordance with applicable laws and contractual commitments, while safeguarding the national interest.
Sheikh said capacity payments had remained a major concern for the business community because industries and consumers ultimately faced the consequences of inefficiencies and financial pressures across the electricity supply chain.
He said Pakistan could not achieve sustainable industrialisation or significantly expand exports unless electricity was available to productive sectors at regionally competitive rates.
High power tariffs, he added, increase the cost of manufacturing Pakistani products and weaken their competitiveness against goods produced in countries where industries have access to more affordable and predictable energy.
Sheikh said export-oriented industries were particularly vulnerable because they had to compete on price, quality and delivery schedules in international markets. Higher electricity costs could reduce margins, discourage expansion and make it more difficult for Pakistani exporters to secure and retain international orders.
The LCCI official also linked the issue to investment and employment, saying investors carefully assess energy prices and reliability before committing capital to industrial projects.
“If the cost of doing business remains uncompetitive, attracting fresh investment and expanding existing industries become increasingly difficult,” he said.
Sheikh maintained that reforms should not be confined to IPP agreements alone. He called for improvements across the power sector, including efforts to reduce transmission and distribution losses, improve recoveries, strengthen governance and eliminate inefficiencies that contribute to the financial burden on consumers.
He said a sustainable solution required addressing structural weaknesses rather than repeatedly transferring rising power-sector costs to compliant consumers and documented businesses.
The LCCI senior vice president urged policymakers to engage chambers of commerce, industrial associations, energy experts and other stakeholders while formulating long-term electricity-sector reforms.
He said the business community was not seeking temporary measures but a transparent, predictable and sustainable energy framework capable of supporting industrialisation and economic growth.
Sheikh also called for greater transparency regarding the components determining electricity tariffs so that businesses could better understand the costs they were being required to bear.
He said reducing the electricity burden on productive sectors could help revive industrial activity, encourage investment, protect employment and improve Pakistan’s export competitiveness.
The government, he added, should pursue reforms that balance contractual obligations and energy security with the need to protect businesses and consumers from unsustainable electricity costs.
Sheikh said Pakistan’s economic recovery depended significantly on strengthening its productive sectors, adding that affordable and reliable electricity was essential for achieving that objective.
The LCCI’s concern centres on the broader financial structure of the electricity sector and the effect of power-purchasing and capacity costs on tariffs.
Persistently high electricity costs can increase manufacturing expenses, squeeze business margins and weaken the ability of Pakistani products to compete internationally.
The LCCI is seeking structural power-sector reforms, greater transparency and a review of contractual and capacity-payment arrangements to achieve more sustainable electricity pricing.
Affordable energy remains crucial to Pakistan’s efforts to expand exports, attract investment, create jobs and strengthen industrial production.
