In a significant move, the Pakistani government has demanded that five independent power producers (IPPs) either voluntarily terminate their Power Purchase Agreements (PPAs) or face severe repercussions. This directive targets four IPPs established under the 1994 policy and one under the 2002 policy. According to officials, these IPPs have been receiving excessive payments, including capacity charges and returns on equity, which the government is no longer willing to bear, with costs ranging from Rs139-150 billion per year over the next 3-5 years.
One IPP owner responded that his company would terminate the contract if the government paid Rs55 billion, a proposal the government flatly rejected. Instead, officials suggested that the owner voluntarily terminate the agreement without compensation.
The IPPs are also accused of violating contractual obligations, such as using their plants as collateral to raise funds for other ventures. Additionally, the government alleges that these IPPs inflated their operational and maintenance costs between 2020-2024, leading to unjustified profits.
The owners have been summoned for meetings with the government’s task force, with the threat of forensic audits and potential criminal proceedings if they fail to comply. State Minister for Power Division Muhammad Ali has proposed a solution, offering to establish a private power market within two years, allowing the IPPs to sell electricity independently.
This bold move is part of the government’s broader strategy to reduce capacity payments and address inefficiencies in the power sector.
