Islamabad: The government is set to finalize a major agreement with 18 Independent Power Producers (IPPs). This agreement will transition from “take or pay” model to a “take and pay” model for electricity purchases. This change is expected to significantly cut power costs and optimize the energy payment structure.

Deal Expected to Save Rs 70-100 Billion Annually

According to sources, the agreement is anticipated to be signed within two weeks. The shift to “take and pay” could result in annual savings of Rs 70-100 billion by eliminating the need for fixed capacity payments to IPPs. Instead, the government will pay only for the electricity that is actually dispatched to the grid.

The deal aims to ease Pakistan’s financial burden from capacity charges that are incurred even when power plants are idle, freeing up funds for other pressing needs.

Key IPPs Included in the Agreement

The agreement covers 18 major IPPs with a combined power generation capacity of 4,267 megawatts. Notable facilities include:

• Uch-I Power Limited (586 MW)
• Pakgen Power Limited (365 MW)
• Engro Power Gen Qadirpur (227 MW)
• Nishat Power Limited (200 MW)

These IPPs are among the key private power producers in Pakistan, supplying significant electricity to the national grid.

Elimination of Fixed Capacity Payments

Under the “take and pay” model, the government will only pay IPPs for the electricity they supply, eliminating fixed capacity payments. Capacity payments were previously made to IPPs even when their power was not used, leading to increased financial strain on the government.

Pakistan Stock Exchange Reaches New Milestone, Crosses 94,000 Level

An industry source explained, “The government will still cover necessary operational and maintenance costs to keep the IPPs functional, ensuring they remain available to the grid when needed.” This change will allow IPPs to continue essential operations without burdening the government with extra costs.

Settlement of Past Dues

The agreement also addresses outstanding dues owed to IPPs, which will be settled through a mix of cash and Treasury bills. Importantly, the government will avoid additional interest payments on these dues, further reducing financial liabilities. This approach is aimed at ensuring smooth relations with IPPs while addressing payment backlogs.

“Take and Pay” Model to State-Owned Plants

Once the agreement with IPPs is finalized, the government’s Power Task Force will begin applying the “take and pay” structure to state-owned power plants. These include plants operating on LNG, GENCOs, as well as provincial, nuclear, and hydropower projects.

This shift is a part of broader energy sector reforms intended to improve efficiency and make the energy market more sustainable in the long term.

The “take and pay” model will remain in place until a competitive private power market is established in Pakistan. The government is working towards a market-based system that will allow for competitive bidding and private investments, reducing dependency on fixed contracts and streamlining costs.

Follow Day News on Google News, Instagram, YouTube, Facebook, Whats App, and TikTok for latest updates