Govt pays Rs979 billion to 33 IPPs in capacity payments during FY2023-24

The federal government has paid Rs979.29 billion in capacity payments to 33 independent power producers (IPPs) from July 2023 to July 2024, as revealed by the Power Division in the National Assembly. 

These payments were made to IPPs under the current Power Purchase Agreements (PPAs), which allow IPPs to recover fixed costs, including debt servicing, based on the plant’s availability for generation. 

Of the total Rs 979.29 billion, Rs718.064 billion was paid to IPPs using local and imported coal, Rs106.991 billion to hydropower IPPs and Rs81.6 billion to oil-based IPPs.

Key recipients of these payments include China Power Hub Generation Company (Rs137.02 billion), Huaneng Shandong Ruyi Energy (Rs113.71 billion), and Thar Coal Block-1 Power Generation Company (Rs159.9 billion), among others. The government also paid Rs106.99 billion to hydropower companies, including Karot Power Company (Rs75.788 billion).

The Power Division highlighted that the devaluation of the Pakistani rupee has increased both capacity and energy payments, further burdening consumers. In response, the prime minister has constituted a task force to oversee structural reforms aimed at reducing electricity tariffs and easing the federal government’s financial burden. The task force will also work on establishing a competitive energy market.

The Power Division also presented details of the losses incurred by electricity distribution companies. Hyderabad Electric Supply Company (HESCO) reported losses of over 27% of electricity for the past three years, while K-Electric showed losses ranging from 15.27% to 16% during the same period. 

To address electricity theft, the division reported that 84,362 incidents of theft were recorded between September 2023 and August 2024, with 291 individuals arrested and Rs885.381 million in arrears recovered.

In addition, the Petroleum Division informed the National Assembly about outstanding dues of Pakistan State Oil (PSO) from Pakistan International Airlines (PIA), which now amount to Rs29.4 billion for jet fuel supplies. 

Minister for Petroleum said that PIA’s weak financial position has hindered its ability to make payments, and the clearance of PSO’s dues is expected to be addressed after PIA’s privatisation. 

The Sui Southern Gas Company Limited (SSGCL) also reported a fiscal deficit of Rs462 billion, with Rs1.05 trillion in total payables and Rs588 billion in receivables.

Meanwhile, Petroleum Minister Dr. Musadik Masood Malik clarified that the government has no plans to lift the moratorium on new domestic gas connections due to depleting natural gas resources, though liquefied natural gas (LNG) connections for housing schemes are being allowed. 

Malik also noted that natural gas resources are declining by 7-8% annually, and Pakistan continues to import LNG under long-term agreements with Qatar.