In a significant development, the Power Division has affirmed its readiness to cancel Independent Power Producers (IPPs) agreements if recommended by the National Assembly Standing Committee on Power. This commitment was made in response to the increasing focus on the IPPs’ contracts amidst a backdrop of soaring electricity prices, hefty capacity payments, uncontrolled circular debt, and significant solarization. The cancellation of these agreements could potentially bring about a positive change in the power sector.
The Power Division’s statement precedes the imminent meeting of the Senate Standing Committee on Power, a crucial platform for addressing IPP-related issues. The committee’s chairman has also voiced the opinion that Pakistan and IPPs are no longer compatible.
Secretary Power Rashid Mehmood Langrial, in a recent testimony before the Standing Committee, painted a dire picture of the country’s power sector. He underscored the projected losses of Rs600 billion, which are in addition to the losses approved by the regulator.
Amid discussions on the generation cost, which significantly impacts existing tariffs, there were propositions to terminate the IPPs’ contracts. In response, the Secretary Power stated, “We will do whatever the Committee, which is a competent forum, will recommend,” he further added, “The Committee should send us its recommendations for the cancellation of IPPs’ contracts, and we will do it.”
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Additionally, Minister for Power Sardar Awais Ahmad Khan Leghari proposed to the committee that the profiles of each IPP be individually scrutinized, including the expiration dates of their contracts, payments made to them, and the overall benefits of their presence in the country.
The committee was also informed about the mounting circular debt, which stood at Rs2.393 trillion as of June 30, 2024, with an additional Rs83 billion. Despite the government’s unwavering commitment to the IMF to maintain the circular debt at the level of Rs2.310 trillion, it has unfortunately surpassed this threshold. The government’s dedication to financial management is evident in this commitment.
Furthermore, the government has expressed its intention to privatize Distribution Companies (Discos), with the Privatization Commission and the World Bank actively involved in the process.
