No Tax Planned to Offset Rs1.5tr Gencos Revenue Hit

Staff Report:

The government has no plan to impose any new tax or levy to recover a massive Rs 1.56 trillion being passed on to the electricity consumers due to revising tariff agreements with state-owned Gencos.

During the public hearing held here on Thursday, power division officials informed that there would be a total saving of Rs 1.5 trillion for the electricity consumers during entire life of the state-owned power projects.

This will hit the income of the government, but there are no plans to revise it from the masses by imposing new taxes or levies,” power division officials said.

During the hearing, it was informed that Central Power Purchasing Agency (Guarantee) Limited (CPPA-G) has signed Negotiated Settlement Agreements/MoUs with the following government-owned plants to reduce the consumer-end tariff.

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 747 MW, and National Power Generation Company Limited – Nandipur.

CPPA-G had filed a joint application before the National Electric Power Regulatory Authority (Nepra) for a reduction in tariff components of these plants pursuant to the negotiated agreements. Notice of Admission/Hearing was published on April 18, 2025.

During the public hearing conducted here on Thursday, the power tariff of the Gencos would be reduced up to Rs 0.32 per unit.

The power tariff of CPGCL 747 MW would be reduced by Rs 0.24 per unit, NPGCL Nandipur Rs 0.32 per unit, NPPMCL Haveli Bahadur Shah Rs 0.27, and NPPMCL Balloki Power Project Rs 0.26 per unit.fair super tax system

Return on Equity (ROE)

Under a deal, the rate of return (ROE) for foreign is fixed at 13% at Rs. 168/US$, with no future indexation. ROE beyond 35% shall be paid on a units-delivered basis (i.e., Take and Pay basis).

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.

Indexation – O&M

Local O&M shall be indexed at 5% or the 12-month average NCPI, whichever is lower. A 30% discount shall apply on 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.

Submission Before Authority

CPPA-G had requested that ROE and ROEDC foreign shall be revised to 13% at a fixed exchange rate of Rs. 168/US$.

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.

Local O&M Indexation

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 the actual depreciation per annum. Any appreciation shall be fully passed on to consumers.

Insurance

The maximum limit of the insurance component shall be capped at 0.9% of the allowed EPC cost for Nandipur and Guddu 747, and 0.8% of the sum insured for Balloki and HBS.

Foreign ROE Components

The foreign component of ROE and ROEDC shall be recomputed at a 13% return using a fixed exchange rate of PKR 168/USD. No further exchange rate indexation shall apply.

Hybrid Take and Pay Model

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.