ISLAMABAD: Prime Minister Shehbaz Sharif announced on Thursday that the federal government would terminate contracts with five independent power producers (IPPs) in a bid to alleviate the financial burden of high electricity bills on Pakistani citizens. This decision comes amidst widespread discontent regarding soaring electricity prices, which have significantly impacted the already inflation-hit populace.
The prime minister explained that by terminating these contracts, consumers would save approximately Rs60 billion annually, while the national treasury would benefit from a substantial saving of Rs411 billion. Sharif emphasized that these five IPPs had prioritized the nation’s interests over their own, leading to the end of the controversial “take and pay” system that had previously been in place.
During a cabinet meeting, he highlighted the necessity of revising agreements with other IPPs to gradually lower tariffs across the board. The prime minister also noted a decrease in the inflation rate, which has dropped to 6.9% from over 30% during the same period the previous year, suggesting that the government’s economic policies are beginning to take effect.
Earlier this month, the targeted IPPs agreed to the government’s demands to terminate their contracts, a move that reflects ongoing negotiations and pressure from the Shehbaz administration. An official involved in the task force on power sector reform indicated that the modalities for contract termination are being finalized and that all five IPPs would soon sign the necessary documents.
PM Shehbaz expressed gratitude towards the IPP owners, acknowledging their cooperation and commitment to the nation. He also praised the task force established to oversee these reforms, as well as the federal cabinet for their efforts in facilitating this process.
In addition to addressing power sector challenges, the prime minister noted the record remittances from overseas Pakistanis, which totaled $8.8 billion in the last quarter. This figure, he asserted, reflects the growing confidence of expatriates in the government’s policies.
The five IPPs involved in this contract termination include HUBCO, LALPIR, Saba Power, Rousch Power, and Atlas Power. While Rousch Power is set to be privatized following the transfer of its ownership to the government, the other four IPPs will retain their ownership, and no payments will be made by the government upon contract termination.
This strategic move by the Sharif administration aims to not only address the immediate financial relief needed by consumers but also to set a precedent for future negotiations with power producers in Pakistan, ensuring a more favorable environment for both the economy and its citizens.
