Govt eyes Rs3.5tr savings in more IPP deals

ISLAMABAD: After concluding talks with 29 Independent Power Producers (IPPs) that would save Rs3.498 trillion in future payments, the government is working on finalising negotiations with 75 more power producers — mostly solar and wind — by the end of April or May, despite facing international resistance in some cases. Federal Minister for Power Awais Leghari, while briefing a parliamentary panel, said this, adding that the government was also working on a plan to borrow Rs1.2 trillion from commercial banks to manage the mounting circular debt in the power sector. The renegotiation of agreements with the producers will not only generate savings but also help reduce circular debt.

Senator Mohsin Aziz, chair of the Senate Standing Committee on Power, accused the IPPs of over-invoicing and criticised inflated project costs. “Wind power plants installed between 2012 and 2014 are the real culprits,” he asserted, blaming high tariffs for the financial burden on consumers.

Since July 2024, the government has terminated six IPP contracts and revised agreements for eight bagasse-based power plants. However, negotiations with 75 IPPs are still pending. Officials noted that 29 agreements had been finalised, while wind and solar projects remained a major sticking point, as policymakers struggle to balance cost reductions with investor confidence. The power minister, while briefing the parliamentary panel, acknowledged international resistance to Pakistan’s efforts to renegotiate power contracts. Even foreign diplomats have intervened in the matter, he told lawmakers. Despite that, negotiations were progressing with mutual consent, with the government hoping to conclude all agreements by late April or early May, he informed the panel.

Revised agreements had already been signed for 12,000 megawatts (MW) of capacity, including 14 private power plants with a combined output of 3,200 MWs and six state-owned power plants. However, negotiations for 15,615 MWs of government-owned power plants remained unresolved, he said.

The government’s revised solar policy also came under scrutiny, with Senator Shibli Faraz questioning its impact on thousands of consumers.

Minister Leghari revealed that Pakistan has 282,000 net metering solar consumers with a total installed capacity of 4,100 MWs. The new policy is yet to be approved by the federal cabinet, as the prime minister has directed a review to ensure sustainability and fairness. The policy would not affect existing consumers but would introduce stricter regulations for new applicants, the minister said. Shibli Faraz criticised the plan to buy electricity from solar consumers at Rs10 per unit while selling it at Rs50, calling it an unjustified burden on the public. Leghari defended the pricing, arguing that capacity charges must be recovered to ensure grid stability.