Electricity bills: Govt struggling to find solution to capacity charges

ISLAMABAD: Prime Minister Shehbaz Sharif on Saturday sought proposals from the Ministry of Finance and Ministry of Energy to waive off capacity charges in electricity bills.

According to sources, the Ministry of Energy has proposed paying off the capacity charges of Rs 4 trillion in one go. This would enable the government to provide relief to the people with their electricity bills.

Sources said that the proposal also suggests that the amount should be paid in one instalment to avoid further accumulation of circular debt. This would reduce the burden of circular debt and provide relief to the people.

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The Ministry of Energy has also proposed that the amount should be financed by the Ministry of Finance. Once the amount is paid, the Ministry of Energy would be able to provide relief to the people in their electricity bills, sources added.

However, the Ministry of Finance has linked the provision of relief in electricity bills to the conditions set by the International Monetary Fund (IMF).

The proposals have been presented to Prime Minister Shehbaz Sharif, but a final decision has yet to be made. It is pertinent to mention that the Government of Pakistan estimated capacity payments to IPPs amounting to Rs 2,091 billion for the current fiscal year.

According to official documents, the highest capacity payments are estimated for nuclear plants at Rs 465.7 billion. The capacity payments for hydropower plants are estimated at Rs 446.4 billion, while imported coal power plants are expected to require Rs 395.4 billion.

The Thar coal power plants are estimated to need Rs 256 billion in capacity payments, and LNG power plants are projected at Rs 168 billion.

Wind power plants are estimated to require Rs 168 billion in capacity payments, and furnace oil power plants are projected at Rs 81.33 billion.

Capacity payment refers to the payment made monthly by consumers to the power-producing company to maintain its capacity to generate electricity, ensuring that additional demand can be met.

Notably, these capacity payments to IPPs are made in US dollars, not Pakistani rupees. Former caretaker commerce minister Gohar Ejaz has been raising awareness through his statements and social media posts about the government’s mistakes and how these mistakes, if not corrected, will deteriorate the country’s economic conditions further.