Govt Recovers Rs35 Billion from Power Plants Amid Sector Overhaul

ISLAMABAD: The government has recovered Rs35 billion from independent power producers (IPPs) and terminated contracts with six power plants as part of ongoing power sector reforms. The announcement came during a Senate Standing Committee on Power meeting, chaired by Senator Mohsin Aziz, where key stakeholders discussed restructuring initiatives aimed at making the sector more sustainable.

Special Assistant to the Prime Minister (SAPM) on Power, Muhammad Ali, highlighted that the government has implemented a rupee-based tariff system for bagasse-based power plants and those operational between 1994 and 2002. Additionally, the government has reduced the return on investment for power plants from 35% to 17%, addressing long-standing concerns about excessive profits in the sector.

In an effort to curb circular debt, the government is negotiating to restructure outstanding payments over the next five to seven years and is also working to lower the profit margins of 45 renewable energy projects to ensure sustainable pricing.

Despite these developments, concerns were raised over whether the cost benefits of these negotiations had reached consumers. Federal Minister for Power Awais Ahmad Khan Leghari reassured that electricity tariffs have already been reduced by Rs4 per unit for domestic consumers and Rs11.5-12 per unit for industrial sectors, with further reductions expected as negotiations progress.

A major structural reform under discussion is the creation of a new entity named ISMO (Independent System and Market Operator) to introduce a competitive electricity market, ensuring long-term stability and efficiency in the power sector.

During the session, Senator Haji Hidayatullah Khan raised concerns about 86,000 vacant positions in power distribution companies (DISCOs), to which Minister Leghari confirmed that 36,000 vacancies would be filled in the coming months. Additionally, he dismissed rumors of a tax on solar energy, confirming that the government has no immediate plans to impose such a tax.

The meeting also addressed the restructuring of the National Transmission & Despatch Company (NTDC), with Chairman Faiz Ahmad Chaudhry stressing the need to revamp internal processes. He pointed out that one of the key issues is the stark difference in electricity consumption patterns between summer and winter, which requires urgent regulatory changes.