Prime Minister Shehbaz Sharif on Thursday announced the government is terminating, “with mutual consent,” contracts with five independent power producers (IPPs), adding this will help reduce electricity bills.
“Consumers will save Rs. 60 billion overall annually and the national exchequer will save Rs. 411 billion,” he said during a meeting of the federal cabinet. “These five IPPs kept the nation’s interests first and their interests aside. The take and pay system has ended for them,” he said, adding the process would continue in a phased manner and agreements with other IPPs would be similarly revised.
Over the summer, Pakistan erupted in protests over high electricity bills, with most experts blaming the capacity payments due to various IPPs for the hefty costs. As the outrage mounted, the government announced it would reconsider agreements with IPPs and either revise or wrap them up, as appropriate, through mutual consent to avoid any legal penalties.
“The rate of inflation was more than 30% [last September]; it now stands at 6.9%,” continued the prime minister, hailing the benefits to the public. Praising the five IPPs who “voluntarily” agreed to ending their contract, he maintained they played a key role in initiating public relief. “The entire cabinet, including me, is grateful to these IPP owners,” he said, adding the task force established for the reform of the power sector and the members of the federal cabinet deserve special praise for this effort.
In a subsequent press conference, Power Minister Awais Leghari echoed the prime minister’s remarks and said the government was working on reducing electricity bills through various measures. He said one of the reforms underway was enabling consumers to purchase electricity from multiple suppliers, stressing this would boost competition and end the government’s role as sole power purchaser. He also stressed on curbing distribution losses, noting it would further help reduce bills in the next 3-4 months.
During his speech, Mr. Sharif also highlighted the record increase in remittances from overseas Pakistanis. “Record remittances of $8.8 billion in the last quarter reflect the confidence of overseas Pakistanis in government policies,” he said.
According to a statement issued by the Prime Minister’s Office, the cabinet meeting also discussed details of the agreement between the task force and the owners of the HUBCO, LALPIR, Saba Power, Rousch Power and Atlas Power IPPs, as well as the process of concluding the agreements with them. Of these five, the Privatization Commission would privatize Rousch Power after its transfer of ownership to the government. The remainder would be retained by their present owners, but would not be guaranteed payments by the government.