KARACHI – A sigh of relief for inflation hit Pakistanis as the incumbent government approved revised agreements with over dozen independent power producers (IPPs), and it will help prices to be cut by Rs11 per unit.
The federal cabinet okayed major reforms, as new contracts are expected to save government a whopping Rs1.5 trillion, come after negotiations led by the Power Division.
The move will also cut IPPs’ profits and operational costs by Rs802 billion. In addition, Rs35 billion will be recovered from the IPPs due to past excess profits, providing further financial relief. The revised agreements involve IPPs operating under the 2002 and 1994 power policies, with one 1994-policy agreement being terminated. The government anticipates annual savings of Rs137 billion, which are expected to result in lower electricity bills for consumers.
The federal government members hailed the decision as significant achievement, emphasizing that it would help eliminate circular debt and ease the financial burden on consumers. He also commended the efforts of the Power Minister, Power Advisor, Power Secretary, and the task force responsible for successfully renegotiating the deals with the IPPs.
These revisions are set to bring long-term benefits to the country, providing substantial savings for both the government and electricity users alike.
Last year, Pakistan Energy Task Force renegotiated Power Purchase Agreements (PPAs) with multiple Independent Power Producers (IPPs) under the 1994 and 2002 policies, leading to reduced profits, past financial adjustments, and interest cuts.
The federal government is addressing concerns over over-billing and unfair tariffs, with recommendations to shift to rupee-based payments and a “take and pay” system.
Major Revisions in IPP contracts to revolutionize Power Sector with Rs922 Billion savings
