The government informed a parliamentary panel on Wednesday that revisions to power purchase agreements (PPAs) with 29 private and some state-owned power plants had resulted in savings of approximately Rs3.5 trillion over their respective three- to 20-year terms.
Additionally, the circular debt, which currently stands at around Rs2.4 trillion, is expected to decline to Rs400-450 billion by the end of the year.
During a meeting of the Senate Standing Committee on Power, chaired by Senator Mohsin Aziz, the Power Division confirmed that the federal cabinet had returned the revised solar net-metering policy—previously approved by the Economic Coordination Committee (ECC)—for further review and adjustments.
Power Minister Awais Leghari informed the committee that the government would no longer be required to pay Rs3.498 trillion to 29 independent power producers (IPPs) and government power plants (GPPs) following these revisions. These payments were initially due over varying durations, depending on each project’s commercial operation date.
The revised agreements include the termination of contracts with six IPPs and modifications to agreements with 14 others under the 1994 and 2002 power policies, as well as nine bagasse-based plants. The committee was informed that of the total 38,000MW capacity, agreements had been signed with IPPs covering 12,000MW. Additionally, the government has revised contracts for six state-owned power plants with a combined capacity of 3,200MW, while negotiations for another 15,615MW in the public sector are still pending. The power minister assured the committee that all PPA revisions would be completed by late April or mid-May.
According to officials, terminating contracts with six IPPs has led to Rs411 billion in savings, while eight bagasse-based projects account for Rs238 billion in savings. Meanwhile, modifications to 14 other IPPs operating under the 1994 and 2002 policies have resulted in Rs922 billion in savings.
Revisions in contracts for public-sector generation companies have also been finalized and approved by the cabinet. Savings from these revisions include Rs355 billion from two plants in Guddu and Nandipur and Rs2.2 trillion from four LNG-based plants in Punjab.
The committee was informed that consumers would benefit from these savings once tariff revisions undergo the necessary regulatory approvals. The final announcement will be made by the prime minister after this process is completed.
However, Senator Shibli Faraz criticized the government for prematurely discussing a potential Rs8 per unit reduction in electricity tariffs. In response, the power minister defended the move, citing the International Monetary Fund’s (IMF) recent Staff-Level Agreement as validation that the government’s policies were on the right track. He added that the revised contracts were still undergoing regulatory processing and that the savings would be incorporated into the quarterly tariff adjustment (QTA) before any official announcement.
During the session, Senator Mohsin Aziz noted that 40% of industries had already shut down due to soaring energy costs, while another 20% were at risk of closure, leaving only 40% of industries operational.
Regarding solar net-metering, Senator Shibli Faraz expressed concerns that sudden policy changes could discourage investors, leading to uncertainty in the energy sector.
In response to inquiries about Rs1.2 trillion in loans acquired to address circular debt, the power minister explained that the amount would be financed through an existing debt-servicing surcharge. He anticipated that the process would be completed next month and expressed optimism that, combined with other internal adjustments, this would bring the circular debt down to Rs400-450 billion from the current Rs2.4 trillion.
The committee requested further details, pointing out that authorities had yet to provide key information, including project commencement dates, final pricing, and the local manufacturing costs of power plants.
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