Revised agreements with power producers to save Pakistan PKR 922 billion

Pakistan will save PKR 922 billion ($3.3 billion) as a result of revised agreements with Independent Power Producers (IPPs), Federal Minister for Power Awais Laghari disclosed during the Cabinet Committee on Power Division meeting on Tuesday.

The meeting was chaired by Prime Minister Shehbaz Sharif.

The meeting was informed that a reduction of PKR 802 billion in profit and costs has also been approved following discussions with 14 specific IPPs. Moreover, the IPPs will also waive PKR 85 billion in interest and PKR 35 billion in deductions from additional profits.

It was stated that the government has so far revised 28 agreements with IPPs, saving a total of PKR 1,457 billion. Out of these, 14 IPPs were established under the 2002 policy, four under the 1994 policy. One agreement was terminated.

According to the Power Division, a reduction of PKR 12 billion in the circular debt in Pakistan's power sector was observed between July and November, as it decreased from PKR 2,393 billion on June 30 to PKR 2,381 billion in November. An increase of PKR 368 billion in circular debt was witnessed during the same period in 2023.

On the other hand, the surge in recoveries from the power sector increased by 96%, compared to 4% from July to November 2023.

The government has also witnessed a decrease of PKR 53 billion in losses in most of Pakistan's power sector companies, except for Hyderabad and Sukkur Electric Supply Companies.

The losses of power sector companies were PKR 170 billion from July to November, compared to PKR 223 billion during the same period last year. If the losses in HESCO and SEPCO (amounting to PKR 29 billion) had been avoided, the overall financial performance of Pakistan's power sector would have been even better, leading to further improvements in both circular debt reduction and recovery rates.

According to the Power Division, electricity prices have also been reduced to PKR 4.64 per unit due to government initiatives.