The federal government has issued a warning to independent power producers (IPPs), including wind power plants, that those refusing to renegotiate their agreements will face forensic audits. Special Assistant to the Prime Minister (SAPM) on Power, Muhammad Ali, shared this during a Senate panel meeting on Monday.
Muhammad Ali revealed that the government has already terminated contracts with six private power plants, while others have agreed to shift to rupee-based returns and a hybrid take-and-pay model. He noted that the government previously paid between Rs. 70 billion and Rs. 80 billion annually to these plants, with Hubco alone receiving Rs. 30 billion. The scrutiny is part of efforts to reduce capacity payments and enhance efficiency in the power sector. He also denied allegations that power producers were pressured into renegotiations.
The government is advancing broader power sector reforms, including plans to privatize Islamabad Electric Supply Company (IESCO), Gujranwala Electric Power Company (GEPCO), and Faisalabad Electric Supply Company (FESCO). Additionally, Hyderabad, Sukkur, and Peshawar power companies will be offered under long-term concession agreements.
In parallel, the federal government is negotiating with banks for a Rs. 1.24 trillion loan to address the Rs. 2.381 trillion circular debt. Authorities aim to secure the loan at a 6-7% interest rate for seven years, leveraging the declining discount rate, which has dropped from 22% to 12%. However, banks are proposing a KIBOR+1 rate.
SAPM Muhammad Ali also addressed concerns about delays in consumer benefits, stating that the government has reduced power plant returns to 17% and recovered Rs. 35 billion in excess fuel payments. Negotiations with 45 renewable energy plants are ongoing to bring profit margins to sustainable levels.
Meanwhile, Minister for Power Awais Leghari announced that ongoing IPP negotiations are expected to save Rs. 1.4 trillion. He also confirmed reductions in electricity tariffs ranging from Rs. 4 to Rs. 11 per unit for domestic and industrial consumers, with further cuts anticipated. Leghari assured that the government has no plans to impose new taxes on solar power.
