The Power Division presented a comprehensive report to the National Assembly, outlining the capacity payments to IPPs (Independent Power Producers) made from July 2023 to July 2024. The report revealed that a staggering Rs 979.29 billion had been paid to 33 IPPs during this period. The payments include Rs 718.064 billion paid to eight IPPs that generate electricity from both local and imported coal, Rs 106.991 billion to three IPPs that produce power from hydropower, and Rs 81.60 billion to 11 furnace oil-based IPPs.
The Power Division elaborated that under existing power purchase agreements, IPPs are allowed to recover fixed costs such as debt servicing through capacity payments to IPPs, based on the availability of their plants for electricity generation. In contrast, energy purchase payments are made to cover fuel costs, which are calculated based on actual fuel procurement rates. Additionally, the report highlighted that operational and maintenance (O&M) costs are tied to the actual electricity produced.
The Power Division noted that due to the devaluation of the Pakistani rupee, both capacity and energy payments have increased significantly, further burdening consumers. These rising costs have created a substantial financial strain on the country’s energy sector.
To address these challenges, the Prime Minister has established a task force dedicated to identifying and implementing structural reforms in the power sector. The primary objective of this task force is to reduce electricity tariffs for consumers while alleviating the financial pressures on the federal government. Moreover, the task force aims to create an efficient, liquid, and competitive energy market that is self-sustaining.
The Power Division also informed the National Assembly that agreements with various IPPs are reviewed periodically to ensure their terms remain relevant to current economic conditions. The most recent negotiations took place in February 2021.
Additionally, the Power Division provided details on the electricity losses sustained by K-Electric and Hyderabad Electric Supply Company (HESCO) over the past three fiscal years. HESCO reported losses of 27.4% in 2021-22, 27.1% in 2022-23, and 27.1% in 2023-24. K-Electric’s reported losses were 15.35% in 2021-22, 15.27% in 2022-23, and 16% in 2023-24.
As part of the anti-theft campaign in HESCO, which took place from September 7, 2023, to August 27, 2024, the Power Division reported that 84,362 incidents of electricity theft were recorded across distribution companies. The campaign resulted in the arrest of 291 individuals involved in electricity theft. Furthermore, 768 cases were filed by the Distribution Companies (DISCOs), and 47 employees were dismissed due to their involvement in these activities. Arrears of Rs885.381 million were recovered as a result of the campaign.
In a separate submission, the Petroleum Division informed the National Assembly that Pakistan State Oil Company Limited (PSOCL) is owed Rs 29.4 billion by Pakistan International Airlines (PIA) for jet fuel supplies, with Rs 15.64 billion being the principal amount and Rs 13.4 billion accruing as a late payment surcharge. The Petroleum Division explained that PIA’s weak financial position and liquidity issues have contributed to its inability to meet its payment obligations. The privatisation process of PIA is currently underway, and a mechanism to clear PSO’s outstanding dues will be determined after the privatisation is completed.
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The Petroleum Division also reported on the fiscal health of the Sui Southern Gas Company Limited (SSGCL), stating that the company’s total payables stand at Rs 1,050 billion, with receivables amounting to Rs588 billion, resulting in a fiscal deficit of Rs462 billion. SSGCL’s payables include Rs 248 billion owed to OGDCL, Rs 284 billion to PPL, Rs 150 billion to GHPL, Rs 176 billion to other creditors, and Rs 192 billion in late payment surcharges. On the receivables side, Rs38 billion is owed by the power sector, Rs68 billion by the industrial sector, Rs 36 billion by domestic consumers, and Rs 439 billion under tariff differentials.
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Meanwhile, Minister for Petroleum Dr. Musadik Masood Malik informed the National Assembly that there are no plans to lift the moratorium on new domestic gas connections. The minister explained that the moratorium was imposed due to the country’s declining natural gas reserves. However, the caretaker government has granted permission for new housing schemes to receive liquefied natural gas (LNG)-based connections for domestic use.
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The minister further stated that Pakistan’s natural gas reserves are depleting at an annual rate of 7-8%. Globally, natural gas is supplied to consumers primarily through liquefied petroleum gas (LPG) cylinders, but in Pakistan, the majority of gas is distributed through pipelines. Regarding LNG imports, Dr. Musadik Masood Malik said that Pakistan State Oil (PSO) currently has two long-term sales and purchase agreements (SPAs) with Qatar, which are valid until December 31, 2031. On average, PSO imports nine LNG cargoes per month, equivalent to 900 million cubic feet per day (MMCF/day). The imported LNG is then supplied to various sectors, including power, industry, CNG, and cement.
