IPP Bonanza: Plundering Pakistan’s Purse

Majid Burfat
A startling revelation has come to the forefront, exposing one of the most egregious economic injustices in Pakistan’s recent history. Independent Power Producers (IPPs), operating under the radar for decades, have quietly amassed tax exemptions totaling an astronomical Rs1.217 trillion since the mid-1990s. This discovery paints a bleak picture of a nation where the already overburdened and impoverished taxpayers are relentlessly squeezed, while a privileged few reap enormous benefits under the guise of economic policy. This blatant misuse of public funds has gone unchecked, revealing the extent to which the corridors of power are complicit in plundering the national treasury. As Pakistan’s citizens struggle to make ends meet, the extent of this economic malpractice demands immediate and uncompromising accountability. The time has come to hold those responsible to account and ensure that justice is not only served but visibly upheld by the highest courts, leaving no room for immunity or evasion. The magnitude of these tax exemptions is particularly galling when placed alongside the ever-increasing capacity payments made to these IPPs. These payments, expected to hit Rs2.091 trillion in the current fiscal year, are themselves a point of severe public outcry and scrutiny. Yet, incredibly, the tax exemptions granted to these power producers transcend even these contentious payments. The irony here is palpable: while the average citizen is coerced into paying exorbitant taxes under the threat of legal repercussions, these powerful entities, many linked to the country’s political elite, enjoy a tax-free ride. What is even more troubling is the fact that both domestic and foreign companies have benefitted from corporate tax exemptions on profits earned from electric power plants established after July 1, 1988. This preferential treatment has persisted across various regimes, whether democratic or autocratic, highlighting a deeply entrenched culture of favoritism and exploitation. From the Pakistan People’s Party (PPP) to the Pakistan Muslim League (PML-N), to the Pakistan Tehreek-e-Insaf (PTI), and even the recent Pakistan Democratic Movement (PDM) coalition government, none have been immune to this trend. On the contrary, each successive government has overseen an exponential increase in the number of IPPs, starkly documented in official records. The roots of this issue can be traced back to the mid-1990s when Pakistan embarked on a series of power policies aimed at addressing the country’s energy needs. While these policies did result in increased power generation capacity, they also opened the floodgates for corporate exploitation. Official data reveals that around 106 IPPs were established with lifetime tax exemptions during this period. The implications of this policy are staggering: a small group of 40 influential families, many with direct or indirect ties to those in power, have been allowed to amass vast wealth at the expense of the nation’s financial health. Adding to the outrage is the fact that for years, the value of these tax exemptions was meticulously recorded in economic surveys. However, when the exemptions began to skyrocket, the authorities conveniently stopped disclosing this information, opting instead to merge it with data from other sectors to obscure the true scale of the giveaways. This deliberate obfuscation is nothing short of a betrayal of the public trust, revealing a government more interested in protecting the interests of the wealthy than in safeguarding the welfare of its citizens. The situation becomes even more egregious when considering the research of renowned economist Dr. Hafeez Pasha. His calculations suggest that from the mid-1990s to 2017-18, the value of these tax exemptions stood at approximately Rs1 trillion. This figure alone should have sparked a national outcry. Yet, it has only grown, as the number of IPPs has increased dramatically in recent years. Under the PML-N government from 2013 to 2018, 55 new power plants were established, and from 2018 to 2023, an additional 40 were set up under the PTI and PDM governments. What is perhaps most alarming is the lack of accountability and transparency surrounding these exemptions. The government’s decision to conceal the growing value of these tax breaks from the public eye is a clear indication of the complicity of those in power. Even more concerning is the fact that when confronted with these revelations, there has been little to no substantive action taken to address the issue. Instead, the exemptions continue unabated, with no sign of reform on the horizon. This situation stands in stark contrast to the treatment of ordinary taxpayers, who are expected to bear the brunt of the nation’s financial burdens. These citizens, already struggling under the weight of high taxes, are now being asked to subsidize the profits of a privileged few. The injustice of this arrangement cannot be overstated. It is a system that perpetuates inequality, enriches the already wealthy, and punishes those who can least afford it. The time has come for a complete and thorough reassessment of the power sector’s tax policies. The blanket exemptions granted to IPPs must be rescinded immediately, and the billions in lost revenue must be recouped and redirected to more pressing public needs. This is not merely a matter of fiscal prudence; it is a matter of justice. The courts, particularly the apex court, should take suo moto action to ensure that those responsible for this travesty are held accountable. If the concerned authorities remain inert, the judiciary must step in to protect the rights of the nation’s taxpayers. Furthermore, there must be an assurance of blanket accountability with no exemptions. Those who have benefited from these exemptions must be brought to justice, regardless of their political connections or financial clout. This is not a time for half-measures or cosmetic reforms; it is a time for decisive action. Pakistan stands at a crossroads. It can continue down the path of inequality and injustice, where the rich are shielded from the consequences of their actions, and the poor are left to suffer. Or it can choose a different path, one where accountability, transparency, and fairness are the cornerstones of its governance. The choice is clear, but the resolve to make it a reality must come from the highest levels of leadership. The people of Pakistan deserve better. They deserve a government that prioritizes their needs over the profits of a privileged few. They deserve a justice system that is willing to take bold action in the face of wrongdoing. And most of all, they deserve a future where their hard-earned money is used to build a better society, not to line the pockets of the wealthy. The time for change is now. The courts, the government, and the people must come together to demand an end to this egregious injustice. Only then can Pakistan begin to move towards a future that is fair, just, and prosperous for all.