Punjab to fund its new tariff cut with power plants’ profit
LAHORE: A day after its decision to reduce power tariffs to provide relief in electricity bills, the Punjab government on Wednesday said the relief will be financed with billions in profits hitherto harvested by two government-owned power companies, the Quaid-e-Azam Thermal Power Private Limited and Punjab Thermal Power Private Limited.
The provincial cabinet had decided to cut the power tariffs of these two plants by 30-40 per cent to reduce electricity bills. This move is similar to the federal government’s, which recently renegotiated contracts with independent power plants (IPPs) to reduce tariffs.
The provincial government said that both power companies would not make a profit or withdraw savings, and the amount would be diverted towards public relief. The two state-owned entities had been making between Rs12 to Rs13 billion in profit, which they would now forgo.
Likewise, both companies had savings of about Rs12 billion and it was decided they would not withdraw it to make room for tariff cuts. The amount saved on these heads is expected to translate into a 30 to 40 per cent reduction in electricity rates. This relief would then be conveyed to the federal government to help it overall reduce national tariffs.
Provincial govt says two state-owned companies will forgo profits, give up savings; CM Maryam asks authorities to curb vaping
Welcoming the step, power sector experts believe that Punjab still has more margin, which can be exploited. For example, local banks, which financed these projects, can be requested to reduce the mark-up rate, and a shift away from payments in dollars can also create further space, besides any insurance rate cuts.
Ideally, the government should have shifted loans and their servicing to its accounts; however, what it has already done is commendable and should help reduce national tariff, they added.
In February this year, the government claimed to have secured about Rs1.571 trillion in savings in future payments to a total of 27 independent power producers (IPPs) through re-negotiations.
This was the key takeaway from a presentation made by the power division officials before the Senate Standing Committee on Power.
“The above savings will be passed on to the consumers through changes in agreements and tariffs over the contracting period,” read one of the slides that had been shared with the panel. It explained that Rs411 billion in savings had been secured through the termination of contracts with five IPPs, Rs238bn through the revision of tariff contracts with eight bagasse-based IPPs, and Rs922bn in tariff revisions with 14 thermal IPPs.
Meanwhile, the provincial cabinet has also approved the ’Chief Minister Wheat Program 2025’.
The establishment of Punjab’s first ‘Air Punjab Private Limited Company’ was also approved. CM Maryam Nawaz decided to start the airline within one year. She directed to ensure “safety gear” for labourers and workers and assigned the labour department a target of implementing safety SOPs within one month.
About the cabinet’s decision to shut down vaping stores, Dr Imran Aslam, the CM’s PRO confirmed that she had instructed the departments concerned to impose a ban on vaping as well.
Punjab Energy Secretary Dr Naeem Rauf told Dawn that in light of the recent decision, they would approach Nepra for a reduction in power tariffs for these two plants and would likely revise their power purchasing agreements so that these price reductions get permanence and are reflected in the new tariff.
Published in Dawn, June 5th, 2025