The Energy Task Force has successfully renegotiated agreements with eight bagasse-fired Independent Power Producers (IPPs), potentially saving the government between Rs. 85 to 100 billion.
The revised contracts also aim to reduce a Rs. 22 billion tariff adjustment recently approved by the National Electric Power Regulatory Authority (NEPRA) by Rs. 8 billion.
Notable sugar mills involved in the revised agreements include Hamza Sugar Mills, Chiniot Sugar Mills, and JDW-II. A significant change is the reduction in the rate for bagasse fuel from Rs. 5,600 per ton to Rs. 4,500, along with a 5 percent retrospective deduction applied to the revised fuel cost. This adjustment is expected to affect 42 percent of the previously allowed tariffs for these IPPs.
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Negotiations took place over three days in Rawalpindi, with Special Assistant to the Prime Minister Muhammad Ali confirming that the agreements will transition pricing from a coal-linked mechanism to a PKR-based system, leading to substantial future savings for the government.
Additionally, the deals revise financial terms, including a 50 percent reduction in the working capital component and a 17 percent PKR-based return on equity. NEPRA will review and adjust tariffs accordingly, with the changes set to take effect from October 31, 2024.
This matter has been a topic of discussion in the Senate Standing Committee on Power, where concerns have been raised regarding NEPRA’s past decisions to link bagasse power tariffs to international coal prices.
