Govt to sign take-and-pay mode deal with 18 IPPs in two weeks

18 IPPs in latest deal will collectively generate 4,267 MWs of electricity
An undated image. — Pexels
An undated image. — Pexels

In an attempt to save Rs70-100 billion a year, the government of Pakistan is expected to sign a deal with 18 Independent Power Producers (IPPs) in "take and pay" mode for electricity purchases in the next two weeks.

The electricity purchasing mode was set up under 1994 and 2002 power policies, and the IPPs under the latest deal will collectively generate 4,267 MWs of electricity.

According to The News, there is a high likelihood of a deal on switching the 18 IPPs to take-and-pay mode instead of the existing take-and-pay mode.

“The government would pay the said 18 IPPs in the shape of cash or T-bills the past dues in the head of Energy Charges and Capacity Payments but they would not be paid interest payments,” said power sector industry and government officials.

Citing sources, the publication reported that talks between the government and IPPS are going smoothly.

Electricity purchasing under take and pay mode

The most significant aspect of the "take and pay" mode is that the government is only bound to pay against the actual electricity dispatch and IPPs will not be paid capacity payments at all.

However, the government has assured the IPPs to pay annual expenditures to keep the power plants intact in the system.

Moreover, the government will also bail out the IPPs in terms of operation and maintenance (O&M) costs.

It should be noted that the electricity buying from the 18 IPPs under the take-and-pay mode will remain until the establishment of the private power market.