Govt Threatens IPPs With Forensic Audit for Refusing to Renegotiate Power Contracts

The federal government has warned independent power producers (IPPs) including wind power plants that those refusing to renegotiate agreements will face forensic audits. Special Assistant to the Prime Minister on Power, Muhammad Ali on Monday informed a Senate panel that the government has already terminated contracts with six private power plants while others have agreed to rupee-based returns and a hybrid take-and-pay model. The PM’s assistant said the government previously paid between Rs. 70 billion and Rs. 80 billion annually to these plants. Hubco alone received Rs. 30 billion. The scrutiny aims to reduce capacity payments and improve efficiency in the power sector. Muhammad Ali denied claims that power producers were pressured into renegotiations. The government is also advancing power sector reforms, with plans to privatize Islamabad Electric Supply Company (IESCO), Gujranwala Electric Power Company (GEPCO), and Faisalabad Electric Supply Company (FESCO). Hyderabad, Sukkur, and Peshawar power firms will be offered under long-term concession agreements. Pertinently, the federal government is trying to negotiate with banks for a Rs. 1.24 trillion loan agreement to reduce the Rs. 2.381 trillion circular debt. Authorities want to take advantage of the declining discount rate which has dropped from 22 percent to 12 percent. They want the loan at a 6-7 percent interest rate for seven years, but banks are proposing a KIBOR+1 rate Responding to concerns about delays in consumer benefits, SAPM Power said the government has reduced power plant returns to 17 percent and recovered Rs. 35 billion in excess fuel payments. Talks with 45 renewable energy plants are ongoing to bring profit margins to sustainable levels. Meanwhile, Minister for Power Awais Leghari stated that ongoing IPP negotiations are expected to save Rs. 1.4 trillion. He also confirmed reductions in electricity tariffs of Rs. 4 to Rs. 11 per unit for domestic and industrial consumers, with further cuts expected. The power minister further denied that the government had plans to impose new taxes on solar power.