ISLAMABAD:
The government has stated that it does not plan to impose any new taxes or levies to recover a massive Rs1.56 trillion revenue shortfall, which will result from revising tariff agreements with state-owned generation companies (Gencos).
During the public hearing held on Thursday, it was informed that there would be savings of Rs1.5 trillion for consumers due to a revision in tariff for state-owned Gencos, which means that the government has to face this hit in its income.
“However, the government has no plan to impose another tax or levy to recover this amount from the public,” Power Division officials said.
But they pointed out the possibility that the government was giving subsidies to the power consumers that could be reduced following the hit of Rs1.5 trillion on its income.
During the hearing, interveners appreciated the government and Power Division efforts to slash the tariff by signing deals with power plants to reduce the burden of capacity payments.
The government had also shifted power plants from “take-or-pay” to “hybrid take-and-pay” to reduce the burden of capacity payments.
However, the Power Division officials ruled out a 50% reduction in capacity payments following revised deals with independent power plants and Gencos.
The interveners said that the government had cut gas supply by 220 mmcfd on the SSGC system and by 150 mmcfd on the SNGPL system.
They said that the government should mix this gas with RLNG and provide it to efficient power plants to cut electricity rates further.
It was informed that the Central Power Purchasing Agency (Guarantee) Limited (CPPA-G) had signed negotiated settlement agreements/MoUs with the government-owned plants to reduce end-consumer tariffs.
These power plants included National Power Parks Management Company – Balloki, National Power Parks Management Company – Haveli Bahadur Shah (HBS), Central Power Generation Company Limited – Guddu 747MW and National Power Generation Company Limited – Nandipur.
CPPA-G had filed a joint application before the National Electric Power Regulatory Authority (Nepra) for the reduction in tariff components of these plants under the negotiated agreements. The notice of admission/hearing was published on April 18, 2025.
During the public hearing conducted on Thursday, it was highlighted that the power tariff of Gencos would be reduced up to Rs0.32 per unit.
The tariff of CPGCL’s 747MW plant would be reduced by Rs0.24 per unit, NPGCL Nandipur’s Rs0.32 per unit, NPPMCL Haveli Bahadur Shah’s Rs0.27 and NPPMCL Balloki power project’s Rs0.26 per unit.
Under the deal, the rate of return is fixed at 13% at Rs168/$, with no future indexation. The return on equity (ROE) beyond 35% shall be paid on a units-delivered basis (ie, take and pay).
The insurance component shall be as per actual or 0.9% of the EPC cost for Gencos, whichever is lower. The insurance component shall be as per actual or 0.8% of the sum insured for GPPs, whichever is lower.
Local O&M shall be indexed at 5% or the 12-month average NCPI, whichever is lower. A 30% discount shall apply to foreign O&M indexation in case of rupee devaluation against the US dollar.
In the case of rupee appreciation against the US dollar, 100% of the benefit will be passed on to consumers.
CPPA-G had requested that ROE and ROEDC shall be revised to 13% at a fixed exchange rate of Rs168/$.
The hybrid take-and-pay mechanism shall be approved, with payments beyond 35% based on units delivered. Local O&M indexation shall be allowed at the lower of 5% annually or the average annual NCPI. Foreign O&M indexation shall be allowed as per the revised mechanism.
Indexation shall be the lower of 5% per annum or the average NCPI for the preceding 12 months. Indexation shall follow the existing mechanism; however, PKR/USD depreciation shall only be allowed up to 70% of actual depreciation per annum. Any appreciation shall be fully passed on to consumers.
The maximum limit of the insurance component shall be capped at 0.9% of the allowed EPC cost for Nandipur and Guddu 747MW and 0.8% of the sum insured for Balloki and HBS.
The foreign component of ROE and ROEDC shall be recomputed at a 13% return using a fixed exchange rate of Rs168/USD. No further exchange rate indexation shall apply.
Plants will receive 35% of ROE and ROEDC as part of the capacity payment. If the actual Net Electrical Output (NEO) exceeds 35% of the contracted capacity in terms of kWh, the plants will receive additional ROE and ROEDC based on the excess NEO.
In a statement, NEPRA has decided to discontinue dollar-based indexations for the plants, transitioning instead to rupee-based indexations fixed for the entire useful life of the power projects. This strategic revision aims to curb foreign exchange exposure and reduce tariff volatility for consumers.
The hearing, attended by sector professionals and members of the public, was met with wide appreciation. Citizens commended the authority’s commitment to fiscal responsibility and its proactive role in ensuring a sustainable and consumer-friendly power sector.
Nepra remains steadfast in its mission to implement reforms that ensure transparency, efficiency, and affordability in the power sector.
#Govt #skips #taxes #Rs1.56tr #hit
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