Rs979bn paid to IPPs in a year, NA informed

ISLAMABAD: The Power Division on Thursday presented details in the National Assembly regarding the capacity purchase price charge from July 2023 to July 2024, informing the assembly that Rs979.29 billion had been paid to 33 independent power producers (IPPs).

The details show that eight IPPs generating electricity from local and imported coal received capacity payments exceeding Rs718.064 billion, while three IPPs generating electricity from hydropower received payments exceeding Rs106.991 billion. Additionally, 11 IPPs generating electricity from furnace oil received capacity payments exceeding Rs81.60 billion.

The Power Division explained that the existing power purchase agreements allow the IPPs to recover fixed costs, including debt servicing, through capacity purchase price based solely on the plant’s availability for generation. In contrast, the IPPs receive an energy purchase price to recover fuel costs at the rate at which fuel is procured. Moreover, the variable O&M cost is linked to actual power generation.

Due to the devaluation of Pakistani rupee, capacity and energy payments have substantially increased, further burdening consumers.

The Power Division also informed the National Assembly that the prime minister had constituted a task force to identify and oversee the implementation of structural reforms in the power sector, aimed at reducing electricity tariffs for consumers and easing the financial strain on the federal government. Additionally, the task force is mandated to establish an efficient, liquid and self-sustaining competitive energy market.

The Power Division said that the terms and conditions of agreements with various IPPs had been reviewed periodically, with the most recent negotiations taking place in February 2021.

The Power Division also presented details of the losses incurred by K-Electric and Hyderabad Electric Supply Company (HESCO) over the past three years. According to the written reply presented during Question-Hour, HESCO lost 27.4% of its electricity in 2021-22, 27.1% in 2022-23, and 27.1% in 2023-24, while K-Electric reported losses of 15.35% in 2021-22, 15.27% in 2022-23 and 16% in 2023-24.

Regarding the anti-theft campaign in HESCO from September 7, 2023 to August 27, 2024, the Power Division reported that 84,362 incidents of electricity theft were recorded across the distribution companies. Additionally, 291 people involved in electricity theft were arrested. According to the report, 768 cases were filed by the DISCOs, 47 employees were dismissed and arrears of Rs885.381 million were recovered.

In a separate written reply, the Petroleum Division informed the National Assembly that Pakistan State Oil Company Limited (PSOCL)’s outstanding amount from Pakistan International Airlines (PIA) for jet fuel supplies, as of September 30, 2024, has accumulated to Rs29.4 billion (Rs15.64 billion in principal and Rs13.4 billion in late payment surcharge).

The Petroleum Division stated that PIA has been unable to meet its payment obligations due to its weak financial and liquidity position. It was also noted that the privatisation of PIA is in process, and a mechanism for clearing PSO’s outstanding dues will be decided after the privatisation.

In response to a question regarding the current fiscal deficit of Sui Southern Gas Company Limited (SSGCL), the Petroleum Division reported that the company’s total payables amount to Rs1,050 billion, with receivables at Rs588 billion, resulting in a fiscal deficit of Rs462 billion. The breakdown includes Rs248 billion payable to OGDCL, Rs284 billion to PPL, Rs150 billion to GHPL, Rs176 billion to other creditors and Rs192 billion in late payment surcharges. On the receivables side, Rs38 billion is owed by the power sector, Rs68 billion by the industrial sector, Rs36 billion by domestic consumers, Rs5 billion by others and Rs439 billion under tariff differential.

Meanwhile, Minister for Petroleum Dr. Musadik Masood Malik informed the National Assembly that the government has no plans to lift the moratorium on new domestic connections for indigenous gas. He explained that the moratorium was imposed due to the scarcity of natural gas in the country. However, the caretaker government has allowed new housing schemes to receive liquefied natural gas (LNG)-based connections for domestic use.

The minister also said that Pakistan’s natural gas resources are depleting at a rate of 7-8% annually. He said that, globally, gas is supplied to consumers primarily through liquefied petroleum gas (LPG) cylinders while in Pakistan, gas is supplied through pipelines.

Regarding LNG imports, the minister said that Pakistan State Oil (PSO) has two long-term sales and purchase agreements (SPAs) with Qatar, valid until December 31, 2031. On average, PSO imports nine LNG cargoes per month, equivalent to approximately 900 MMCF/day. PSO imports LNG on behalf of gas utility companies, which then supply regasified LNG to sectors such as power, industry, CNG and cement. The PSO-Qatar LNG SPA is a sovereign contract under a government-to-government arrangement with take-or-pay clauses.