Pakistan’s Ongoing IPP Negotiations Aim to Lower Public Power Cost, Special Assistant to the Prime Minister on Power, Muhammad Ali, has updated the Senate Standing Committee on Power regarding negotiations with Independent Power Producers (IPPs), currently in their final stages. The process is expected to complete within three months, potentially resulting in public financial benefits of Rs. 200-300 billion that could be realized over the next six months.
During the committee meeting, members highlighted the impact of fluctuating exchange rates on the cost of imported coal for Bagasse-powered IPPs. Muhammad Ali addressed these concerns, explaining the challenges in setting stable rates due to variable coal prices. He also reviewed the government’s ongoing efforts to reduce electricity costs, referencing a 2019 study and a 2020 report that recommended major policy changes for IPPs.
Ali pointed out that under the 1994 IPP policy, tariffs were set upfront, while the 2002 policy allowed for higher equity returns, which led to IPPs’ profits surging over 27%. In response, the committee has urged for the rapid implementation of Task Force recommendations to expedite the IPP talks and reduce power costs swiftly.
Pakistan IPP Negotiations Summary
| Details | Information |
|---|---|
| Negotiation Timeline | Concluding in three months |
| Estimated Public Savings | Rs. 200-300 billion (six months) |
| Main Issues Discussed | Dollar rate impact, coal costs |
| Past Policies Cited | 1994 (upfront tariffs), 2002 (returns) |
| Next Steps | Implement Task Force recommendations |
These negotiations reflect Pakistan’s commitment to reducing electricity costs and enhancing transparency in the energy sector. The committee has emphasized quick resolution to bring timely relief to the public.