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Government Renegotiates IPP Contracts to Address Soaring Power Tariffs
Power Minister Awais Leghari announces renegotiation of contracts with independent power producers to tackle unsustainable electricity tariffs.
ND
by News Desk
2024-09-07
Government Renegotiates IPP Contracts to Address Soaring Power Tariffs

Power Minister Awais Leghari revealed on Friday that the government is renegotiating contracts with independent power producers (IPPs) in a bid to reduce unsustainable electricity tariffs, which have burdened both households and industries. The move comes as rising power costs fuel social unrest and hamper economic growth in Pakistan's struggling $350 billion economy.

 

“The current price structure of power in this country is not sustainable,” Leghari told Reuters. Ongoing discussions between the government and IPPs aim to rework existing agreements to balance affordability and business viability.

 

Decades-old power contracts with IPPs were designed to encourage private sector investment and secure guaranteed returns. However, a prolonged economic crisis has led to reduced power consumption and excess capacity, forcing the government to make payments for unused electricity, which are passed on to consumers.

 

Leghari highlighted the need for a cooperative approach, stating that both sides understand that the current situation is untenable. However, he assured that no drastic measures would be imposed, and revisions would be made through mutual consent.

 

The government seeks to lower tariffs from 28 cents to nine cents per unit for commercial users to restore regional competitiveness, with the ultimate goal of driving growth in key export sectors.

 

This renegotiation is crucial to Pakistan's ongoing discussions with the International Monetary Fund (IMF) as part of a $7 billion bailout agreement, which emphasizes reform in the power sector. Talks on reprofiling power debt owed to China and eliminating power subsidies are also underway but face delays.

 

The power sector overhaul is central to reviving Pakistan’s economy and providing relief to consumers as the country navigates an ongoing energy and financial crisis.

 
Tagged:

PowerTariffs

EnergyCrisis

IPPRenegotiation

ElectricityReform
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