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ISLAMABAD: The government informed a parliamentary panel on Wednesday that about Rs3.5 trillion in savings had been secured through revisions to power purchase agreements with 29 private and some state-owned power plants, spanning their three to 20-year terms.
Additionally, the circular debt is expected to decrease to Rs400-450 billion by the end of the year, down from around Rs2.4tr currently.
At a meeting of the Senate Standing Committee on Power, presided over by Senator Mohsin Aziz, the power division also confirmed that the federal cabinet had returned revision in solar net-metering policy cleared by its Economic Coordination Committee (ECC) for further deliberations and revisions.
The government will not have to pay about Rs3.498tr to these 29 independent power producers (IPPs) and government power plants (GPPs) after these revisions that were otherwise due to them over their life spans ranging between three years and 20 years, depending on their actual date of commercial operations, Power Minister Awais Leghari told the meeting.
These included termination of contracts with six IPPs and revisions with 14 others under 1994 and 2002 power policies and nine bagasse-based plants.
Cabinet returns solar net-metering policy for review, Senate body told
The meeting was informed that agreements had been signed with 12,000MW capacity IPPs out of a total of 38,000MW. Government’s six plants of 3,200MW capacity have also been revised, while another 15,615MW in the public sector have not been concluded yet. The power minister said the process of revisions in PPAs would be completed by the end of April or mid-May this year.
Terminations of six IPP contracts involved Rs411bn in savings, eight bagasse-based projects entailed Rs238bn and 14 other IPPs under 2002 and 1994 policies provided Rs922bn in savings, an official told the meeting.
Contracts in public sector generation companies have also been revised and approved by the cabinet, the meeting was told. The total savings in capacity payments and other obligations for two plants at Guddu and Nandipur amounted to Rs355bn and Rs2.2tr from four LNG-based plants in Punjab.
The impact of these savings would be passed on to consumers once the tariff revisions pass through the regulatory process currently underway, after which the prime minister will made a formal announcement, the meeting was told.
Senator Shibli Faraz criticised the government for premature discussions about a supposed Rs8 per unit tariff reduction. However, the power minister defended the move, stating that the IMF’s announcement of the Staff-Level Agreement was proof that the government’s policies were headed in the right direction.
He said the revised contracts are currently in the regulatory processing, and savings will be included in the quarterly tariff adjustment (QTA) before a formal announcement.
Senator Mohsin observed that 40pc industry had already been closed due to high energy prices and the Federal Board of Revenue (FBR), with another 20pc was on the verge of closure, leaving only 40pc of the industry to survive.
Discussing solar net-metering, Shibli Faraz expressed concerns that investors were wary of mid-way policy changes, which could deter new investments.
Responding to a question regarding Rs1.2tr loans for circular debt, the power minister said the amount would be finance through the existing debt-servicing surcharge. He expected the process to be completed next month and hoped that along with other internal adjustments, this would reduce the power sector’s circular debt to about Rs400-450bn from Rs2.4tr at present.
The committee sought detailed information, noting that authorities have yet to provide the commencement date of these projects, the final price, and the local manufacturing cost of the plants.
Published in Dawn, March 27th, 2025
