Defense minister cites capacity payments in long-standing deals with independent power producers
Defense Minister Khawaja Asif speaking at the National Assembly. PHOTO: FACEBOOK/ NATIONAL ASSEMBLY OF PAKISTAN
ISLAMABAD:
Defense Minister Khawaja Asif on Tuesday defended the government’s revised solar energy policy, saying authorities were constrained by long-standing agreements with independent power producers (IPPs) and must balance the interests of solar energy users and conventional electricity consumers.
During a session of Pakistan’s National Assembly chaired by President Sardar Ayaz Sadiq, Asif said that while the shift to solar energy was desirable, capacity payment obligations limited policy flexibility.
“So this is the way forward: go solar. What can we do? You have to make capacity payments; our hands are tied,” he said.
The debate followed a “wake-up notice” filed by Syed Naveed Qamar of the Pakistan People’s Party (PPP), who expressed concern over the imposition of taxes on solar panels.
State Minister Shazra Mansab Ali Khan Kharal said the tax had been reduced from 18% to 10% and would apply only to new consumers. He said the policy was based on multiple considerations.
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In February, the National Electric Power Regulatory Authority revised terms for net metered solar consumers to manage the growing adoption of solar energy and protect the financially distressed grid.
The changes abolished the exchange of electricity units under net metering and proposed to reduce the buyback rate of excess solar energy from Rs 25.9 per unit to Rs 11 per unit. The duration of the contracts was also reduced from seven to five years. The amendments went into effect on February 9 and do not apply to existing consumers until their current agreements expire.
Opposition lawmakers criticized the move, saying it discouraged the adoption of renewable energy. Qamar questioned why green energy was penalized when electricity remained expensive and largely generated from polluting fuels.
Responding to the criticism, Asif said previous agreements with the PPIs (signed two to three decades ago under successive governments, including those of the PPP) were still binding on the current administration. “Discussions were held with the IPPs some time ago, but little progress was made,” he said.
Under these agreements, the government must pay power producers in US dollars based on installed capacity, regardless of actual electricity purchases. Over time, the revised contracts increased unit costs and capacity payments, contributing to a circular debt that exceeded Rp 2.3 trillion.
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Fuel price rise
Lawmakers also expressed concern about rising fuel prices. PPP lawmaker Sharmila Farooqi criticized the recent increases, saying Pakistan had raised oil prices ahead of its regional peers and that official briefings had been unsatisfactory.
He said gasoline still carries heavy taxes and urged the government to reduce oil companies’ margins and develop a comprehensive pricing policy. “People ask us how they will manage their livelihood. Even we hesitate to get gas,” he added.
In response to the ongoing energy crisis, the government on Thursday further increased petrol prices by Rs 137 per liter to a record Rs 458.4. It was the second major increase in fuel prices in less than a month. However, on Friday night, Chief Minister Shehbaz announced a reduction of Rs 80 per liter in petrol tax.
Noor Alam Khan, a member of the National Assembly, criticized the Finance Minister saying: “By increasing prices, oil companies have benefited,” he said, adding that rising diesel costs have made all products more expensive. “Now even the wheat crop has become unaffordable.”
Noor Alam also questioned why oil prices rose even though Saudi Arabia provided oil and Iran provided passage. “If Saudi Arabia was supplying oil and Iran was facilitating the passage, then why did oil prices continue to rise?”
MNA Alia Kamran filed a notice highlighting the shortfall in tax revenue, reporting a deficit of Rs 430 billion last year and accused the government of trying to reduce the deficit by increasing oil prices.
The federal government missed the fiscal target dictated by the International Monetary Fund (IMF) by a wide margin of Rs 610 billion. It is the third consecutive quarter that the FBR has missed its fiscal target. The government is making up for the fiscal deficit by increasing oil tax rates and slashing development spending.
State Minister Bilal Azhar Kayani said Pakistan aims to ensure primary balance. “We have introduced digital invoicing for cement, tobacco and sugar, and we will increase collection. Last year we achieved the primary balance and this year we will also meet our targets.”
He added that during the ongoing war, the government has removed burdens wherever possible, setting the diesel tax at zero and reducing the petrol tax by Rs 80. “Some work has already been done to expand the tax net.”
PPP MNA Mirza Akhtar Baig also criticized the sudden rise in petrol price and asked how much profit companies made after the price rose by Rs 55 overnight. “Global prices may increase, and increases may be necessary, but they must not be so high that life becomes impossible for ordinary citizens,” he said.
He also questioned the Finance Minister about savings and criticized the federal government’s unjustified spending.
Finance Minister Muhammad Aurangzeb, responding to the opposition, defended the government’s fiscal measures in the National Assembly and urged lawmakers to rely on accurate information. “We need to look at the facts,” he said, adding that “some of the things being said in the House don’t exist.”
He said that when global oil prices were rising, “a blanket subsidy was being given to petroleum products,” adding that “129 billion rupees in subsidies have been given so far,” while “100 billion rupees have been cut from the Public Sector Development Programme” and “a third-party audit is being carried out.”
Aurangzeb said targeted subsidies are now being implemented. “Specific subsidies are being provided… the process has begun and the first installments have begun to reach the beneficiaries,” he said, noting that provinces already have electronic data to identify beneficiaries.
He said the government is closely monitoring global developments. “Queues have formed in several countries to buy oil,” he said, adding that fuel prices in the UAE have risen sharply, with petrol rising by around 30% and diesel by up to 70%.
The minister said domestic oil and gas prices are also under review, while maintaining that reserves remain stable. “So far, there has been no impact on foreign exchange reserves,” he said, confirming that a Eurobond repayment worth $1.4 billion is due this week.
Aurangzeb said 26 institutions were handed over to the Privatization Commission, though some are not suitable for privatization. He also acknowledged governance problems and said corruption had been identified in subsidy programs at institutions such as utility stores.
He said lessons from the Covid-19 pandemic are being used to manage the energy crisis, adding that a task force has been created to move towards cleaner energy in the next eight to ten years. “We will move towards clean and green energy,” he said, expressing hope that “peace will prevail” and Pakistan’s efforts for regional stability will succeed.
The Gulfstream plane
MNA Atif Khan raised the issue of newly acquired Gulfstream aircraft by the Punjab government and demanded that until petrol prices are reduced, Punjab Chief Minister Maryam Nawaz should not travel by air. “Only then can we know if they are serious.”
The aircraft in question, a Gulfstream G500 with registration number N144S, arrived in Lahore from North America in December 2025 and began its local flight operations on February 6, 2026. The aircraft acquired by Punjab is a 19-seater VIP aircraft valued at a staggering Rs 11.7 billion, which uses the call sign “Punjab 2”, which is conventionally used when the Prime Minister is on board.
Responding to widespread criticism, Pakistan Muslim League-Nawaz (PML-N) senator Abid Sher Ali said the plane belonged to the Punjab government and its replacement was justified as the previous plane was more than 25 years old.
Defense Minister Khawaja Asif said all four provincial heads of government use planes and that only Maryam Nawaz is being attacked. “This kind of political stance is inappropriate,” he said, adding that the Prime Minister continues to use an older plane.
MP Juniad Akbar responded that all four prime ministers have planes, but the other three use older planes.
Opposition member Zain Qureshi added that the KP Chief Minister does not have a plane and asked why the Punjab Chief Minister bought a Gulf Air plane worth Rs 11 billion. “Why was this decision sabotaged?” said.
Balochistan and Tirah
Meanwhile, opposition leader Mahmood Khan Achakzai called for political dialogue and unity, warned of unrest in Balochistan and urged greater space for civilian leadership.
“We will have to agree on some key points. We need to tell the military to give us some space. Countries cannot function without their armed forces,” he said. He added that if Prime Minister Shehbaz was present, he would go and talk to him personally. “This country can only progress through collective wisdom,” he added.
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Separately, lawmaker Engineer Hamid Hussain highlighted the displacement of residents of Tirah Valley in Khyber-Pakhtunkhwa, saying that more than 26,000 families had been registered in Bara amid ongoing operations and were facing serious difficulties.
Since the beginning of the year, there have been continuous large-scale displacements from the Tirah Valley. More than 26,000 families have been registered in Bara as part of what officials describe as a major humanitarian and administrative operation in the border region.
National Assembly Speaker Ayaz Sadiq ordered authorities to provide details of the affected people and said the matter would be taken up with provincial officials, including the KP inspector general of police.
The session of the National Assembly was suspended until five in the afternoon on Wednesday.
