The Shehbaz Sharif-led government is reportedly planning to adopt a similar approach as the previous Imran Khan administration in dealing with Independent Power Producers (IPPs).

This includes reducing the Rate on Equity of public sector power plants, closing down five Gencos to get relief of up to Rs 4 per unit, and negotiating existing contracts to move from a “take or pay” to a “take and pay” mechanism.

The government has formed a team, including officials from PPIB, CPPA-G and NEPRA, to investigate the IPPs’ data and financials.

Some experts who assisted the previous government in renegotiating IPP contracts are hesitant to get involved again, arguing that repeated “witch-hunting” of the same IPPs will not send a good message to potential investors.

The Imran Khan government’s renegotiations with IPPs established under various policies resulted in only a 48 paisa per unit reduction in tariff.

One government official criticized the previous approach, saying more concessions could have been extracted from the IPPs.

The government is also seeking to re-profile Chinese power loans for 8-10 more years to create fiscal space and reduce high power tariffs.

Read more

ECC ‘all set to clear’ CPEC IPPs dues with approval of worth Rs50b revolving account

ECC approves worth Rs64b supplementary grants for 40% payment to IPPs

UK court orders PM Shehbaz, son-in-law to pay Rs15 million in legal costs

It is unclear if China has responded positively to Islamabad’s proposal. The outstanding amount owed to Chinese power plants is now around Rs 400 billion.

The government believes the returns of IPPs are excessive, and there has been misreporting by the producers and weak regulatory oversight. However, others argue that the IPPs are paid as per the contracts signed by previous governments, so the responsibility lies with the Pakistani authorities.