LAHORE: The independent power producers (IPPs) will not be able to pay wages to their employees in case the government stops paying capacity charges, said industry sources.

They said the capacity charges are like a fixed cost of power plants which the IPPs have to bear in any case.

According to some press reports, the government is likely to constitute a committee under Minister for Power Omar Ayub Khan to negotiate with IPPs for waiver of capacity charges of central power purchasing agency–guaranteed (CPPAG) voluntarily to lower the cost of generation.

Also, the power sector experts are of the view that the government may exercise the clause of force majeure to deal with a crisis-like situation after the spread of COVID-19. The CPPAG pays approximately Rs 45 billion per month (Rs 550 billion per annum) to the IPPs which are passed on to the consumers in the form of electricity charges at the rate of around Rs 3.25/unit on an average.

Interestingly, most of the sources in the IPPs were not ready to comment on the situation, saying no such intimation of setting up a committee under the minister for power has been conveyed to them by the government. They said the IPPs were charging capacity charges ‘as per agreement’ and there was nothing illegal in it.

They said the IPPs are on the verge of default due to earlier delays in payments as the government has not paid capacity charges of Rs 135 billion for over the last 14 months. They said the association of IPPs has already protested against an unjustified and illegal practice of delaying the payment of overdue amounts on the part of government. The IPPs would not be able to avoid imminent default in case an urgent and necessary action is not taken by the concerned quarters.