• Costs reduced through termination of contracts; tariff revision of bagasse and thermal plants
• Talks in progress with 45 public sector power plants for cutting costs, Senate panel told
• PM’s aide says forensic audit of power plants not possible due to high cost, fear of backlash

ISLAMABAD: The government on Monday claimed to have secured about Rs1.571 trillion in savings in future payments to a total of 27 independent power producers (IPPs) through negotiations so far, while another ‘unwilling’ producer would have to undergo a forensic audit.

This was the key takeaway from a presentation made by a power division team — comprising federal minister Awais Ahmad Khan Leghari, Special Assistant to Prime Minister Muhammad Ali and federal secretary Muhammad Fakhre Alam Irfan — before the Senate Standing Committee on Power, led by Senator Mohsin Aziz.

“The above savings will be passed on to the consumers through changes in agreements and tariffs over the contracting period,” read one of the slides presented to the Senate panel.

It explained that Rs411 billion in savings had been secured through the termination of contracts with five IPPs, Rs238bn through the revision of tariff contracts with eight bagasse-based IPPs, and Rs922bn in tariff revisions with 14 thermal IPPs.

The panel was informed that discussions were now in progress with 45 public sector power plants for more savings. Power Minister Leghari also assured the panel the government would neither discourage solar systems nor impose any tax.

SAPM Muhammad Ali said the government was paying Rs70-80bn to five IPPs whose contracts stood terminated, including Rs30bn to Hub Power Company alone. He dispelled the notion that IPPs were forced to revise contracts through pressure tactics. He said payables to the tune of about Rs300bn on account of late payment surcharge were being waived through the negotiation process, including Rs100bn already written off.

Forensic audit

Responding to a question from Senator Shibli Faraz as to why forensic audits were not performed as billions and trillions were paid to IPPs in the past, Mr Ali said Pakistan did not have the expertise to conduct forensic audit of 50-60 plants and required a lot of money.

He said his committee had sought Rs22 million in 2020 for such an audit, but could not get even a rupee. However, now the audit would be conducted of the IPP not agreeing to discussions for tariff revision, he said, adding that an IPP that did not come to the negotiating table was being examined forensically.

Responding to another question, he agreed that IPPs had secured undue payments from the government by misleading it in fuel and efficiency standards, but it was very difficult to establish over-invoicing allegations without solid evidence and such an attempt could backfire and sponsors could go to international arbitration.

Therefore, he said the task force on IPPs was addressing the matter through negotiations as it had examined the balance sheets of these plants for 20 years.

Power Minister Leghari said the previous government did not implement the Muhammad Ali report on IPPs, adding that the present government had already secured over Rs1.4tr from IPPs without any discretion or favour.

Senator Mohsin Aziz appreciated the performance of the task force on IPPs but wondered when these savings would benefit the consumers. Muhammad Ali said it would gradually reach consumers as negotiations progress and contracts come into force. Mr Leghari chipped in by saying that electricity rates had already dropped by Rs4.11 per unit since June 2024 and more substantial tariff reductions were expected.

The meeting was told that the government had fixed the return of 17pc for power plants against the unprecedented return of 35pc in the last decades. SAPM Muhammad Ali stated that the government recovered Rs35bn from the power plants which had been paid by the federal government in lieu of fuel. Additionally, the government has initiated negotiations on 45 renewable plants to reduce the profit margin on the said plants at sustainable rates.

While discussing the circular debt of the power sector, the SAPM underscored that the government was negotiating to relinquish the interest on circular debt and formulate a structure for the payment of stock circular debt in the coming five to seven years.

Published in Dawn, February 25th, 2025