Electricity Tariffs
The Pakistani federal cabinet has approved revised agreements with 14 independent power producers (IPPs), a move expected to bring significant relief to consumers through an estimated reduction of Rs11 per unit in electricity prices.
The decision, announced after a cabinet meeting chaired by Prime Minister Shehbaz Sharif, is projected to save the government a staggering 1.4 trillion Rupees over the lifetime of these agreements.
The revised contracts are the result of extensive negotiations facilitated by the Power Division. These negotiations focused on reducing the profits and operational costs of the IPPs, resulting in a savings of Rs802 billion.
In addition, the government will recover Rs35 billion from the IPPs as compensation for excess profits earned in previous years. Of the 14 IPPs, ten operate under the 2002 power policy, while four are governed by the 1994 policy. One IPP agreement under the 1994 policy has been terminated as part of the reform process.
According to the cabinet’s official statement, these adjustments are expected to generate annual savings of Rs137 billion, which will directly benefit consumers in the form of reduced electricity bills.
The cumulative savings of Rs1.4 trillion over the agreements’ duration are anticipated to significantly alleviate the financial strain on the national economy, particularly by addressing the long-standing issue of circular debt in the power sector.
Prime Minister Sharif described the successful renegotiation of these agreements as a landmark achievement. He emphasized that the reforms will not only relieve the national treasury but also provide tangible benefits to citizens through reduced energy costs.
The Prime Minister expressed hope that these measures would enhance economic stability and improve the quality of life for ordinary Pakistanis.
Acknowledging the efforts behind this accomplishment, Prime Minister Sharif commended the performance of the Power Minister, the Power Advisor, the Power Secretary, and the members of the task force who played a pivotal role in securing the agreement. He underscored the importance of continuing such reforms to strengthen Pakistan’s power sector and ensure its sustainability.
The renegotiation of these IPP contracts marks a significant step towards addressing systemic inefficiencies in the energy sector, with the ultimate goal of making electricity more affordable and accessible for the people of Pakistan.
