The federal government has decided to terminate power purchase agreements with six more independent power producers (IPPs) as part of its strategy to reduce energy costs and power tariffs.
However, the final details and implementation timeline for these terminations are yet to be disclosed.
The Express Tribune reported, citing sources, that the six IPPs, with a combined production capacity of 2,396 megawatts, are expected to save the government more than Rs300 billion following the termination of these agreements.
The government pays over Rs2 trillion annually to IPPs in the form of capacity payments, a significant financial burden on the national exchequer.
On Thursday, during the question hour of the Senate session, the Ministry of Energy disclosed the details of Rs1.41 trillion paid in capacity payments to IPPs over the last two fiscal years.
Documents placed before the House revealed that Rs487 billion was paid to 36 IPPs in the fiscal year 2022-23, while Rs923 billion was disbursed to the same number of IPPs in 2023-24.
On December 10, the federal cabinet approved settlement agreements with eight bagasse-based power producers on the recommendations of the Ministry of Energy and the Power Division.
The approved IPPs include DW Unit I, DW Unit II, RYK Mills, Chiniot Power, Hamza Sugar, Al-Moez Industries, Thal Industries, and Chinar Industries.
According to the Prime Minister’s Office, these settlements with eight IPPs are projected to lower electricity costs for consumers and yield savings of Rs 238 billion for the national treasury.
Earlier, Business Recorder reported that the government’s Task Force on Energy reached an agreement on a hybrid “take and pay” model with 17 IPPs operating under the 1994 and 2002 power policies after extensive discussions. The revised agreements are expected to save the government up to Rs200-300 billion. Key terms include rebased tariffs, profit-sharing adjustments, and changes to indexation mechanisms.
