Islamabad: The federal government has issued a stern warning to independent power producers (IPPs), including wind power plants, stating that those unwilling to renegotiate agreements will be subjected to forensic audits.
Special Assistant to the Prime Minister (SAPM) on Power, Muhammad Ali, informed a Senate panel on Monday that the government has already terminated contracts with six private power plants. Meanwhile, other IPPs have agreed to shift to rupee-based returns and a hybrid take-and-pay model.
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According to Muhammad Ali, the government was previously paying between Rs. 70 billion and Rs. 80 billion annually to these power plants, with Hubco alone receiving Rs. 30 billion. The current scrutiny aims to reduce capacity payments and enhance efficiency within the power sector. He also denied allegations that power producers were coerced into renegotiations.
Privatization Plans and Power Sector Reforms
The government is actively working on power sector reforms, with plans to privatize Islamabad Electric Supply Company (IESCO), Gujranwala Electric Power Company (GEPCO), and Faisalabad Electric Supply Company (FESCO). Meanwhile, Hyderabad, Sukkur, and Peshawar power firms will be offered under long-term concession agreements.
Authorities are also negotiating with banks for a Rs. 1.24 trillion loan agreement to address the Rs. 2.381 trillion circular debt crisis. With the discount rate dropping from 22% to 12%, the government aims to secure the loan at a 6-7% interest rate for seven years, whereas banks have proposed a KIBOR+1 rate.
Savings and Electricity Tariff Reductions
Addressing concerns over consumer benefits, SAPM Muhammad Ali highlighted that the government has reduced power plant returns to 17% and recovered Rs. 35 billion in excess fuel payments. Negotiations are also underway with 45 renewable energy plants to bring profit margins to more sustainable levels.
Minister for Power, Awais Leghari, stated that ongoing discussions with IPPs are projected to save Rs. 1.4 trillion. Additionally, he confirmed reductions in electricity tariffs by Rs. 4 to Rs. 11 per unit for both domestic and industrial consumers, with further cuts anticipated.
No New Taxes on Solar Power
Amid growing concerns over taxation on solar energy, Minister Awais Leghari denied any government plans to impose new taxes on solar power users.
The latest developments mark a significant shift in Pakistan’s power sector strategy as the government seeks to enhance efficiency, reduce costs, and tackle the long-standing circular debt crisis.
