Rs12 per unit power tariff cut on the cards by March

ISLAMABAD: The government aims to slash electricity tariffs by Rs12 per unit by March 2025 through agreements with private Independent Power Producers (IPPs), government power plants (GPPs), and renewable energy sources like wind and solar power plants. This plan follows intense negotiations and proposals to restructure existing contracts, potentially saving up to Rs300 billion annually.

More importantly, the debt reprofiling of the loans for CPEC and government power plants and the methodology to slice down taxes on electricity bills would be finalised by the end of February. The shortfall in revenue would be arranged from other sectors of the economy, a senior government official told The News. In the first phase, the government terminated power purchase agreements with 5 IPPs (M/s Hubco Power, M/s Rousch Power, AES Lalpir Power, Saba Power Plant and Atlas Power) and now it has scrapped the contract of one IPP namely Pakgen Power Limited of 365 MW. In total, the government has terminated contracts with 6 IPPs.

“We will be able to reduce the power tariff by Rs3 per unit through talks with IPPs, GPPs, wind and solar power plants. And the debt re-profiling will further help reduce the tariff by Rs4 per unit. The government’s functionaries want to reduce the taxes on electricity bills with an impact of Rs5 per unit. This is how the off-peak tariff of Rs41.68 per unit would drop to Rs29.68 per unit and the peak-hour tariff of Rs48 would reduce to Rs36 per unit.

The task force on power will complete its talks with 18 IPPs and will convert their contracts based on Take and Pay mode within days as 15 out of 18 IPPs, have already signed the revised contracts. Afterwards, it would initiate talks with the government power plants including nuclear power plants, hydropower houses, coal-based and RLNG-based power plants, provincial power plants and GENCOs. “Once the talks with government power plants are concluded, the government would initiate talks with wind and solar power plants. The dialogue will be completed by February 2025.

The top functionaries of the Finance and Power Divisions are also holding talks with the Chinese government seeking an extension in the loans’ payment tenures to 20 years from 10 years and the government negotiators are on a positive trajectory. About taxes on electricity bills, the official said that FBR collects Rs800 billion per annum through electricity consumers and the Power Division has asked the Finance Ministry to reduce it by Rs500 billion to Rs300 billion. This will further help reduce the power tariff by Rs5 per unit.”

So far, the official said, the government has saved Rs400 billion in the head of future capacity payments by terminating contracts of 5 IPPs, Rs200 billion after revised contracts with Bagasse-based power pants and would save Rs800 billion once Take and Pay mode agreements with 18 IPPs are signed. He said the Take and Pay agreement with 18 IPPs would help lower Re0.70-Rs1 per unit with the impact of Rs70-100 billion. The 18 IPPs would be paid the past capacity payments, whereas the interest payments and excessive profits they made, would be re-adjusted.

“The IPPs that would be made operational now under Take-and-Pay mode are Uch-I Power Limited of 586 MWs, Liberty Power Daharki Ltd 235 MWs, Kohinoor Energy 131 MWs, Fauji Kabirwala Power Company Limited 157 MWs, Attock Gen Limited (165 MWs), Engro Power Gen Qadirpur Limited 227 MWs, Foundation Power (Daharki) of 185 MWs, Halmore Power Generation Company 225 MWs, Liberty Power Tech Limited 200 MWs, Liberty Power Tech Limited 225 MWs, Narowal Energy Tech Limited 220 MWs, Nishat Chunian Power Limited 200 MWs, Nishat Power Limited 200 MWs, Orient Power Company 229 MWs, Saif Power Limited 229 MWs, Laraib Energy Limited 84 MWs and Uch-II Power Project of 404 MWs.”

To a question, the official said that Halmore Power Generation Company has issued notice to the government on revising the contract and Orient Power Company has also written a letter to this effect. The authorities are holding friendly talks with them and hopefully will be able to make them agree on Take and Pay mode, he concluded.