Exaggerated benefits of IPP renegotiations

It seems that the hopes of major relief in the electricity prices on account of ongoing scrutiny and revisions of the power purchase agreements of power producers to slash the huge burden of nearly Rs2.1 trillion capacity payments in consumer tariffs were exaggerated after all. The entire exercise is likely to help cut the power tariffs by less than Rs2 per unit, provided the government decides to pass on the benefit to the consumers at all. Contrary to the earlier messages relayed by the Shehbaz Sharif government about intending to examine the Power Purchase Agreements of every power generation company — private, public and Chinese — set up in the ‘independent power producer (IPP) mode’ to reduce capacity payments to slash power prices substantially, the Special Assistant to the Prime Minister on energy, Muhammad Ali, has disclosed that the “authorities are looking at capacity payments of [just] Rs400 billion”.