ISLAMABAD: Sardar Awais Ahmad Leghari, the Minister for Power, has stated that the financial impact of the revised contracts with Independent Power Producers (IPPs) is projected at Rs 1.1 trillion, which has either already been or will be passed on to consumers.
The Minister made this statement in response to inquiries from the Members of the National Assembly Standing Committee on Power, which met on Thursday under the leadership of Muhammad Idrees. Leghari shared that the revised contracts of 16 IPPs, which were set up under the Power Policies of 1994 and 2002, are scheduled to be presented to the Federal Cabinet soon. “The agreements of five IPPs have been terminated, and the contracts of eight bagasse-based IPPs have been revised. These revised agreements will be presented to the Cabinet in the coming days. The financial impact of these revisions is expected to be approximately Rs 6 to Rs 6.50 per unit,” he said. He further noted that the next phase would involve reviewing the Return on Equity (RoE) for government-owned power plants.
The Minister mentioned that the opportunity to address the IPPs issue existed during the tenure of the previous government under Imran Khan, but it was not pursued at that time. However, the current government has now resolved the issue, and the Prime Minister ensured that even his relatives and friends were held accountable.
Leghari also suggested that there are several elements in the existing tariff structure, and by revising these elements, electricity tariffs could be reduced by Rs 10 to Rs 12 per unit. He confirmed that the government is working towards this goal. In response to questions regarding various taxes on electricity bills, the Minister recommended that the Committee invite the Chairman of the Federal Board of Revenue (FBR) to address the matter.
Regarding a query about the Maximum Demand Indicator (MDI) raised by Khurshid Ahmed Junejo, NEPRA representative Mubashir Bhatti explained that Rs 2.3 trillion will be paid to the IPPs as capacity payments in 2024-25, accounting for 75% of the total electricity cost. He clarified that the purpose of imposing fixed charges was to fulfill the capacity payment obligations. Bhatti emphasized that the government has recognized that reducing electricity prices is their top priority. Since June 2024, electricity prices have been reduced by Rs 11 per unit for the industrial sector and Rs 4 per unit for the overall pool price for other consumers. Currently, the pool price of electricity stands at Rs 35 per unit, excluding taxes and surcharges. However, electricity is being provided to all consumers at Rs 26 per unit due to the winter incentives package, which remains competitive in the region.
“We are working to reduce electricity prices further in the next two to four months, bringing them in line with competitive regional rates,” the Minister stated. While exact figures are not available, the government is anticipating a significant reduction in tariffs. The Minister requested the Committee’s acknowledgment of the review of KE’s generation tariff, which will have a financial impact of Rs 500 billion on KE and Disco consumers over the next five to seven years.
The issue of Captive Power Plants (CPPs) was also discussed. The Secretary of the Power Division stated that no significant progress had been made in negotiations with the International Monetary Fund (IMF) regarding an extension for the closure of CPPs, which are scheduled to be disconnected by January 31, 2025.
Mustafa Kamal, MNA, expressed concerns about the unequal distribution of gas supply among captive consumers, highlighting that some are receiving more gas than others.
Power Minister Awais Leghari concurred with Mr. Kamal, acknowledging the disparity between consumers who use both electricity and gas. He emphasized that both the government and the IMF are working to address this imbalance.
