The federal government has cautioned independent power producers (IPPs), including wind power plants, that those refusing to renegotiate their contracts will be subjected to forensic audits.
Special Assistant to the Prime Minister on Power, Muhammad Ali, informed a Senate panel on Monday that the government has already terminated agreements with six private power plants, while others have consented to switch to rupee-based returns and a hybrid take-and-pay model.
According to Muhammad Ali, the government had previously disbursed between Rs. 70 billion and Rs. 80 billion annually to these plants, with Hubco receiving Rs. 30 billion on its own.
This scrutiny is aimed at reducing capacity payments and enhancing efficiency in the power sector. Muhammad Ali also refuted claims that power producers were coerced into renegotiating their contracts.
In addition, the government is advancing power sector reforms by planning to privatize the Islamabad Electric Supply Company (IESCO), Gujranwala Electric Power Company (GEPCO), and Faisalabad Electric Supply Company (FESCO). Power firms in Hyderabad, Sukkur, and Peshawar will be offered under long-term concession agreements.
Furthermore, the federal government is negotiating with banks for a Rs. 1.24 trillion loan to help reduce the Rs. 2.381 trillion circular debt. The authorities hope to capitalize on the declining discount rate, which has dropped from 22% to 12%, aiming for a loan with a 6-7% interest rate over seven years, although banks are proposing a KIBOR+1 rate.
Read More: The government has successfully renegotiated power agreements with eight additional IPPs
Addressing concerns over delays in passing on benefits to consumers, the SAPM Power stated that the government has reduced power plant returns to 17% and recovered Rs. 35 billion in excess fuel payments. Ongoing discussions with 45 renewable energy plants aim to bring profit margins to sustainable levels.
Meanwhile, Minister for Power Awais Leghari mentioned that the current IPP negotiations are projected to save Rs. 1.4 trillion. He also confirmed that electricity tariffs have been reduced by Rs. 4 to Rs. 11 per unit for both domestic and industrial consumers, with further cuts expected.
The minister also denied reports that the government intends to impose new taxes on solar power.
