ISLAMABAD: The federal government on Monday announced that any power plant or Independent Power Producer (IPP) refusing to accept its proposal for revising contracts will face a forensic audit to trace the money trail.
This statement was made by Special Assistant to the Prime Minister, Muhammad Ali, in response to a query by the Opposition Leader in the Senate, Senator Syed Shibli Faraz, during a meeting of the Senate Standing Committee on Power chaired by Senator Mohsin Aziz.
Senator Faraz, who is also the author of a report on IPPs, strongly criticized the Power Division’s failure to manage the unregulated power sector and its handling of IPP issues.
Agreement revisions with govt-owned IPPs in next phase: Leghari
“Isn’t it true that IPPs did over-invoice?” Senator Faraz asked.
He referenced Muhammad Ali’s own report, which recommended conducting a forensic audit of IPPs, but questioned why the current government had opted for a more aggressive approach with IPPs.
According to the revised contracts, a “take and pay” structure has replaced the old “take or pay” arrangement, with the rupee dollar parity fixed at Rs. 168.
In response, Muhammad Ali, SAPM on Power and co-chair of the Task Force on IPPs, rejected the idea that the government was treating IPPs harshly.
He explained that if the intended outcome could be achieved through negotiations, there would be no need for a forensic audit. However, for any power plant that refuses to accept the government’s terms, a forensic audit will be conducted.
Ali added that the government currently pays Rs. 70 to 80 billion annually to power plants whose contracts have been terminated, including Rs. 30 billion to the Hubco power plant. He also pointed out that NEPRA had already advertised a forensic audit for an unnamed IPP (widely believed to be Halmore) and warned that any wind or solar power projects that defy the government’s proposals would also face audits.
He clarified that the consent of foreign lenders (Development Finance Institutions - DFIs) would be sought for renewable energy projects like wind and solar. Additionally, he mentioned that the government had secured Rs. 35 billion from IPPs that were previously stalled due to arbitration and was now negotiating with government-owned power plants to reduce their rates of return.
Ali further informed the committee that the government was working on eliminating power sector debt through financing from banks, negotiating Rs. 1.3 billion in loans at a 6% interest rate. He emphasized that Rs. 300 billion would be saved by waiving Interest on Late Payment (LPI) surcharges. “We have already waived Rs. 100 billion in late payment surcharges, and we aim to waive another Rs. 300 billion,” said Ali.
Senator Shibli Faraz praised the government’s efforts to reform the power sector, stating that the opposition would support the government’s efforts to address these issues.
However, he suggested that those who signed the controversial IPP contracts should be held accountable, even if it meant “bringing them out from the graves.” He further stated that He further stated that provinces do not care of Discos losses, so their representation on Discos Board is irrelevant
Power Minister Sardar Awais Khan Leghari mentioned Nadeem Babar of Orient Power, who had played a role in creating obstacles to fixing certain IPP issues. He noted that the revised and terminated projects were expected to generate savings of Rs. 1.4 trillion.
The Chairman of the Standing Committee commended the Task Force for its dedicated work on the IPP issue, which he described as a cartel.
Responding to a question from Senator Haji Hayatullah, the Power Minister assured the committee that no tax would be imposed on solar panels and announced that tariff reductions would be forthcoming. He also assured that there would be no load shedding during Sehr and Iftar across the country, including high-loss feeders.
Regarding the privatization of Discos, the Secretary of Power briefed the committee that three Discos would be privatized, while three others would be placed under long-term contracts. Future IPPs will be determined after system improvements.
The Power Minister emphasized that privatizing Discos would be pointless if they continued to receive subsidies like K-Electric, which still receives Rs. 170 billion annually under the Tariff Differential Subsidy.
According to the press release, Power Division informed that the Government has fixed the return of 17 pc for Power Plants against the unprecedented return of 35 pc in the last decades. Additionally, the government has initiated negotiations on 45 renewable plants to reduce the profit margin on the said plants at sustainable rates.
Muhammad Ali further highlighted that the government intends to make an entity named as ISMO for comparative markets in order to make power sector sustainable for the future.
Senator Mohsin Aziz remarked that relief has not been trickled down to consumers despite all the positive outputs of IPPs negotiations. Federal Minister for Power stated that the government has reduced electricity cost around 04 rupees per unit for domestic consumers and 11.5 to 12 rupees for industrial sectors. It is hoped that the cost of electricity will further lower down in the coming as the negotiations with other IPPs will conclude.
Furthermore, Senator Haji Hidayatullah Khan highlighted the matter of vacant vacancies in Peshawar Electric Supply Company. Federal Minister for Power stated that around 86,000 vacancies are vacant in all DISCOs and the government intends to fill the 36,000 vacancies in the coming months.
During the meeting, the Committee discussed the implementation status of the recommendations contained in the Report of the Special Committee of the Senate on Circular Debt, authored by Senator Syed Shibli Faraz in 2018, when he served as the Convener of the Committee. Officials of Power Division apprised that the major portion of recommendations has been implemented and the government is working on the recommendation of ‘Simplification of Tax’.
Moreover, the Committee was briefed on the restructuring of NTDC. Chairman NTDC, Fiaz Chaudhry informed that the government plans to overhaul the structure of NTDC, keeping its functions in mind.
However, he emphasized that the real problem lies within the organization itself, and there is an urgent need to change the building code in order to reduce the significant gap between winter and summer consumption.
Copyright Business Recorder, 2025
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