New power incentive packages set to roll out for industrial sector

ISLAMABAD: In a bid to invigorate Pakistan’s industrial sector, the federal government will roll out new power incentive packages over the next two months, announced Federal Minister for Power Awais Leghari on Tuesday. The forthcoming schemes will feature both seasonal and year-round incentives, designed to bolster industrial energy consumption and alleviate current power constraints.

The packages will introduce a “Winter Months Package” alongside an “All Year Incentivized Package.” “The government is also evaluating nighttime electricity consumption patterns to provide reduced rates during off-peak hours, aiming to enhance industrial efficiency. It will unfold in the next two months,” Leghari said. The government has allocated Rs60 billion for installation of automated transformers, which will allow for selective shutdowns rather than complete feeder outages, thus maintaining power supply to the compliant users. The minister said this while briefing a parliamentary panel on the current key power issues, including the IPPs saga.

He also criticized the previous administration’s handling of Independent Power Producers (IPPs). He revealed that Muhammad Ali, now Special Assistant to the Prime Minister on Power, had conducted a preliminary review of IPP issues that lacked depth and recommended further scrutiny. He added that the then cabinet’s arbitration caused damage and benefited the IPPs. Senator Shibli Faraz proposed a new audit, but Leghari suggested addressing the existing concerns before pursuing additional investigations. He also advocated for an in-camera session to discuss the prior government’s missteps with the IPPs, which took place for 15 minutes shortly after the public briefing.

Leghari acknowledged the impact of high electricity tariffs on solar adoption, noting that 6,500MW solar capacity was imported last year for off-grid use. He warned that new hydropower projects would come at a steep cost, with per-unit expenses projected at Rs20 to 25 due to the high fixed costs and interest payments. Senator Mohsin Aziz, chairing the Senate Standing Committee on Power, warned of a looming revolution due to the IPPs. “We warned eight years ago that it would become a monster, and now we are facing the brunt. The industries are closing, and unemployment is rising,” he said.

The committee urged a comparative analysis of electricity tariffs in the neighboring countries and requested detailed information on establishment and operational issues of IPPs.

Leghari committed to providing a transparent and credible data in response. The minister added that from 2015 to 2018, power plants were established with foreign investment. During this period, nobody was coming to invest, but China stepped in and invested. At that time, the dollar was at Rs100, and the interest rate was less than half the current rate. Aziz noted irregularities in the Rs480 billion payments in 2013, with a report presented in the Senate. He sought its current status. The CEO of the Central Power Purchasing Agency (CPPA) said the case was referred to the National Accountability Bureau (NAB) at that time. When Aziz asked about its outcome, the official had no reply. Aziz said the IPPs were powerful people. Leghari, however, said, “I will urge the NAB to expedite it.”

Aziz recommended that the ministry conduct a comparative analysis of electricity tariffs in neighboring and regional countries. The panel emphasized the need to consider factors such as heat efficiency, evacuation responsibility, capacity charges, and performance of underutilized plants. The committee also requested the tariff rates at which these IPPs were established, the mistakes that have been made, and how to settle them.

Leghari said there were certain provinces and areas where power theft was very high. He further stated that an understanding was developed with the KP chief minister to reduce loadshedding to zero on some feeders with the commitment of full recovery, but it did not help.

Secretary Power Division Rashid Mahmood Langrial said the installed capacity had now dropped to 39,000 megawatts. In June, the electricity generation capacity fell to 29,000 megawatts due to a decline in hydel generation. The government is also planning to shut down five plants including Hubco, with a combined capacity of 2,500 megawatts, which will help reduce the capacity payment burden. He further noted that without demand constraints, the capacity to generate 236 billion units a year exists, but due to low demand, only 132 billion units (58 percent) were produced. He observed that the K-Electric’s power generation costs were excessively high, prompting the government to supply it with electricity from the national grid and provide a subsidy of Rs170 billion to maintain uniform tariffs across the country. He said K-Electric had a generation capacity of 2,962 megawatts, with the national grid supplying up to 1,100 megawatts. This will increase by 600 to 700 megawatts following the utility’s interconnection agreement with the National Transmission and Dispatch Company (NTDC).

In response to a question about free electricity for power sector employees, he informed that only Discos, Wapda and Gencos employees got this facility costing Rs15 billion annually, with 190,000 employees receiving an average annual benefit of Rs78,000.