ISLAMABAD:
The government on Friday approved revised electricity purchase contracts with 15 power plants, which would save about Rs163 billion over the remaining life of their contracts and also write off interest payments to government-owned plants.
The decision, taken by the Economic Coordination Committee (ECC) of the Cabinet, would help marginally reduce energy costs and pave the way for clearing the Rs235 billion circular debt that the government owes to its own power plants.
Headed by Finance Minister Muhammad Aurangzeb, the ECC revised the terms of agreements with 14 wind-based plants and one solar plant, the Quaid-e-Azam Solar Power Plant, terminated the contract of Altern Energy Limited, and revised deals with Fauji Kabirwala Power Plant and Atlas Power Limited.
It also waived late payment surcharges of the government-owned power plants for one more year to create room for clearing their outstanding dues of Rs235 billion.
The proposed measures are the outcome of negotiations with a number of power producers and are intended to rationalise tariff structures, streamline payment arrangements, and resolve outstanding financial liabilities through mutually agreed settlements, said the Ministry of Finance after the meeting.
It added that the ECC approved the reform package and related financial measures, noting that the initiative was expected to contribute to improved sustainability of the power sector, reduce tariff pressures on consumers, and support broader sectoral reforms.
There was a dichotomy in the existing contracts of the wind-based power plants. The upfront tariff policy-based wind plants were receiving Rs42 per unit price while the cost-plus plants were paid Rs17 per unit.
According to the revised contracts, three power plants set up under the 2013 upfront pricing policy have agreed to receive a fixed return on equity in local currency at the exchange rate on the debt repayment expiry date. They have also agreed to receive reduced operation and maintenance costs. There will also be a reduction in the cap of the insurance component. The late payment interest has been waived off and the KIBOR rate on late payments has been cut by 2%.
In return, these three plants will receive their outstanding dues on the date of execution of the deal. The government has saved Rs39 billion from these three plants over the remaining life of their contracts. Likewise, it approved new terms for 11 cost-plus price-based plants, which would save another Rs79 billion.
The ECC also approved new terms for the Quaid-e-Azam Solar Power Plant and fixed its return on equity at 13% and the exchange rate at Rs168 per dollar in line with deals with other power plants. The revised terms would result in savings of Rs46 billion.
The ECC also revised the agreement with Fauji Kabirwala Power Plant and waived its liquidated damages due to non-supply of fuel by declaring it another force majeure event.
It also approved waiving late payment interest of the government-owned power plants. The current outstanding payables to the government-owned plants, excluding interest payments, stand at Rs235 billion.
These contracts had been negotiated by the prime minister’s task force on implementing structural reforms in the power sector.
The ECC also approved another summary from the Petroleum Division seeking a Rs3 billion supplementary grant for provision of gas supply schemes in villages located within a five-kilometre radius of gas production fields. The schemes are being implemented through Sui Southern Gas Company Limited (SSGCL) and Sui Northern Gas Pipelines Limited (SNGPL).
The ECC further approved a summary submitted by the National Disaster Management Authority (NDMA) seeking Rs3.6 billion for reimbursement of expenditures incurred during Monsoon Response 2025 operations and overseas humanitarian assistance, said the finance ministry. It also approved a summary submitted by the Power Division for a Rs1.3 billion supplementary grant for the parliamentarians’ scheme.
The ECC considered a summary submitted by the Ministry of Information and Broadcasting seeking a supplementary grant of Rs2.2 billion to clear outstanding liabilities related to federal public information and awareness campaigns. The committee approved the grant to the extent of Rs1.5 billion and directed the ministry to present the remaining requirement in the next quarter.
