The federal government is poised to finalize a new agreement with 18 Independent Power Producers (IPPs) within the next two weeks, transitioning them to a mandatory ‘take-and-pay’ model for electricity purchases. This strategic shift is anticipated to save the government between Rs. 70-100 billion annually.

Under the new terms, payments to the IPPs will be based solely on the actual electricity dispatched, effectively eliminating capacity payments. The government has committed to settling outstanding dues related to energy and capacity payments through cash or Treasury bills, excluding interest payments. Additionally, it will cover annual operation and maintenance costs to ensure the continued operation of the power plants.

This arrangement is set to remain in place until a private power market is developed. Following the successful implementation of this agreement with the IPPs, the government intends to extend the ‘take-and-pay’ model to its own power plants, including those utilizing LNG, nuclear, and hydropower. This extension will be guided and facilitated by the Task Force on Power.