Top military leadership has intensified efforts to ensure that the Power Sector Reforms make the industry financially and operationally sustainable. In a significant move, owners of several independent power producers (IPPs) met with military officials to present their proposals aimed at reducing power tariffs. These Power Sector Reforms are expected to provide relief to both the masses and the industrial sector, boosting economic activity.
Sources reveal that the military leadership was briefed by private sector IPPs on the challenges within the power sector. They highlighted that government-operated power plants receive Rs 840 billion annually, while CPEC power plants receive Rs 650 billion in capacity payments, based on a dollar value of Rs 278. In contrast, IPPs established under the 1994 and 2002 power policies receive only Rs 130 billion, with the dollar value capped at Rs 148 since 2021. This discrepancy underscores the need for Power Sector Reforms to address financial imbalances.
The military was informed that the capacity payments for a single Sahiwal coal power plant exceed those of all 2002 policy IPPs combined. Government plants, including nuclear, hydel, and RLNG, receive capacity payments five times greater than all older IPPs combined. The owners of six to seven IPPs met with military officials in small groups, detailing the pressing issues in the power sector. They warned that further reductions in capacity payments for 2002 policy IPPs would only save Rs0.85 per unit for FY25, and Rs 0.54 per unit for 1994 policy IPPs, totaling a minimal Rs 1.39 per unit in pre-tax bill savings. Notably, no representatives from the Power Division were present at these meetings.
The IPPs stressed that their capacity payments have been drastically reduced since 2021 due to the capping of the US dollar value at Rs 148. They also noted that most IPPs established under the 1994 and 2002 policies are nearing the end of their power purchase agreements (PPAs), with many transitioning to a ‘take-and-pay’ mode, eliminating capacity payments altogether. They argued that continued pressure on private sector IPPs could deter future investments across various sectors of the economy, making Power Sector Reforms even more critical.
During the meeting, it was revealed that Rs 6 per unit of electricity is being stolen across various distribution companies (Discos), with recovery efforts through overbilling still ongoing. A proposal to hand over loss-making Discos to provincial governments was discussed, with the stipulation that any inability to reduce losses would result in deductions from the provinces’ shares in the NFC award.
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The IPPs also proposed that under-construction dams and hydropower projects be converted into public limited companies. This move, they argued, would allow the public to invest through stock exchanges, with each project overseen by a board of directors holding annual general meetings to curb corruption and improve efficiency, further advancing Power Sector Reforms.
