PSX closes higher despite volatile trading

  ISLAMABAD: Pakistan’s federal government paid a total of Rs6,405 billion to Independent Power Producers (IPPs) in capacity payments between 2020 and 2025, the National Assembly has been informed, highlighting the growing financial burden associated with the country’s power sector. According to a written response submitted by Federal Minister for Energy Awais Ahmad Leghari, capacity payments increased significantly during the five-year period despite government efforts to renegotiate power purchase agreements and reduce electricity costs. The figures presented to the National Assembly show that capacity payments rose from Rs613.9 billion in FY2020-21 to Rs1,807 billion in FY2024-25. This represents an increase of approximately 194% over the period. The government paid Rs613.9 billion in capacity charges during FY2020-21. The amount increased to Rs775.9 billion in FY2021-22 before rising sharply to Rs1,307 billion in FY2022-23. Capacity payments reached their highest level during FY2023-24, when the government paid around Rs1.902 trillion to IPPs. Although the amount declined slightly in FY2024-25 to Rs1.807 trillion it remained almost three times higher than the amount paid in FY2020-21. Capacity payments are charges made to power producers for keeping their generating plants available to supply electricity, regardless of whether the full generation capacity is actually utilised. These payments are part of the contractual arrangements between the government and IPPs and have frequently been identified as one of the factors contributing to Pakistan’s expensive electricity system and growing circular debt. Responding to questions in the National Assembly, Energy Minister Awais Ahmad Leghari said the government has taken several measures to reduce the financial pressure created by existing power agreements. According to the minister, a government task force has terminated power purchase agreements with six IPPs, while agreements with several other producers have also been revised. The objective of these measures is to reduce electricity costs and limit the financial burden on the national power sector. The Ministry of Energy estimates that the changes made to the agreements could result in savings of approximately Rs4.3 trillion over the remaining life of the contracts. Leghari also clarified that payments made to power producers are based on tariffs determined by the National Electric Power Regulatory Authority (Nepra) and the terms agreed under the relevant power purchase agreements. He rejected the impression that generators were receiving payments outside the approved contractual and regulatory framework, stating that there were no additional payments beyond the applicable arrangements. Despite the government’s renegotiation efforts, the figures show that capacity payments continue to represent a major financial obligation for Pakistan. The Rs1.807 trillion paid in FY2024-25 alone demonstrates the scale of the challenge facing the country’s power sector. The government’s efforts to terminate and revise agreements are expected to provide substantial savings in the coming years. However, reducing capacity payments and addressing the broader issues of electricity pricing, power utilisation and circular debt remain critical challenges for Pakistan’s energy sector.

  A nationwide strike planned by Pakistan’s petrol pump owners and fuel dealers has been postponed after successful negotiations with the government. Following the talks, both the Petrol Pump Owners Association and the Petroleum Dealers Association withdrew their strike calls after receiving assurances that their key concerns, particularly regarding profit margins, would be addressed. The Petrol Pump Owners Association had initially announced that the strike would begin at 12:00 midnight, while the Petroleum Dealers Association planned to suspend operations from 6:00 a.m.However, after reaching an understanding with government representatives, both organizations decided to call off the protest, ensuring that fuel supplies would continue without disruption. Speaking after the meeting, Federal Minister for Petroleum Ali Pervaiz Malik thanked the All Pakistan Petrol Pump Owners Association and various petroleum dealers’ organizations for their willingness to engage in dialogue. He appreciated their decision to postpone the strike in the interest of the public and emphasized the importance of resolving issues through consultation rather than confrontation. The minister acknowledged that the country has been facing economic and regional challenges, particularly since developments in the region earlier this year. He noted that the prevailing situation has created uncertainty and concerns for both businesses and the public. According to Ali Pervaiz Malik, Prime Minister Shehbaz Sharif is fully aware of the hardships being faced by citizens and remains committed to minimizing the impact of economic pressures on the people. He further stated that the government has already provided subsidies worth several hundred billion rupees to protect consumers from rising fuel costs. The minister said a targeted subsidy mechanism has been developed to ensure that relief reaches those who need it the most. He also praised oil refineries and petroleum sector stakeholders for their continued cooperation and support during challenging times. Addressing the dealers’ primary demand, Ali Pervaiz Malik confirmed that the issue of increasing petroleum dealers’ profit margins would be resolved through mutual consultation. He announced that a summary regarding the proposed increase in dealer margins would soon be presented to the federal cabinet for approval. The government, he added, is committed to finding a fair solution that balances the interests of both consumers and fuel retailers. The petroleum minister also revealed that the recently introduced daily fuel pricing system would be reviewed after a two-week trial period. During this time, the government will closely monitor its implementation in consultation with petroleum organizations before making any long-term decisions. He emphasized that all stakeholders would continue working together to improve the system and address any operational concerns. Meanwhile, Nadeem Khan, Secretary Information of the Petrol Pump Owners Association, confirmed that the government had assured dealers that their commission and profit margin issues would be resolved. He expressed optimism that the matter would be settled within the next two weeks, allowing dealers to continue operating under more sustainable financial conditions. Nadeem Khan said the associations had decided to postpone their protest based on the government’s commitments. He expressed hope that the authorities would honor their promises and implement the agreed measures within the announced timeframe. He also welcomed the decision to review the daily fuel pricing mechanism on a trial basis, saying it would provide an opportunity to evaluate its impact before any permanent implementation. The successful negotiations have prevented a nationwide disruption in fuel supplies, offering relief to motorists, businesses, and the general public. Both the government and petroleum sector representatives expressed confidence that continued dialogue and cooperation would help resolve outstanding issues while ensuring a stable fuel supply across the country.