ISLAMABAD: The federal government anticipates annual savings of up to Rs300 billion from renegotiating or terminating contracts with Independent Power Producers (IPPs), potentially reducing electricity tariffs by Rs2-3 per unit. This was disclosed by Special Assistant to the Prime Minister on Power and Energy Task Force Co-chair Muhammad Ali in a briefing to the Senate Standing Committee on Power, led by Senator Mohsin Aziz.
Ali stated that ongoing negotiations with IPPs could generate significant savings, with Rs400 billion already saved through early termination of five IPP contracts. Additionally, adjustments to eight bagasse-based IPPs have delinked tariffs from coal prices and the U.S. dollar. Further negotiations with IPPs under the Power Policies of 1994 and 2002 are underway, with plans to later address government-owned, wind, and solar plants.
The committee reviewed a report revealing excess profits of Rs55 billion by IPPs under the 2002 policy. Senator Aziz criticized the IPP agreements as exploitative, while Ali highlighted the inefficiency of prior regulatory audits by NEPRA. The government aims to shift from a “take-or-pay” to a “take-and-pay” model, enabling a fair return on excess profits and reducing tariff burdens on consumers.
Ali emphasized the need for independent institutions to address energy sector issues and advocated for a shift away from government control in favor of developing power markets. The task force’s efforts have already led to the termination of several power plants, resulting in annual savings of Rs60 billion.
Story by Mushtaq Ghumman
