Islamabad, October 10, 2024 – In a decisive move, Prime Minister Shehbaz Sharif on Thursday announced the termination of power purchase agreements with five Independent Power Producers (IPPs), a landmark decision aimed at alleviating the financial burden on the nation’s electricity consumers.
This termination is expected to generate annual savings of Rs 60 billion for consumers and contribute to a cumulative relief of Rs 411 billion for the national exchequer.
Chairing a federal cabinet meeting, Prime Minister Shehbaz underscored the significance of this action, describing it as part of broader efforts to mitigate the crippling capacity payments currently borne by the public. He assured that this would result in a reduction in electricity prices, further easing financial pressures on households and businesses.
“The owners of the five IPPs have shown remarkable patriotism by prioritizing the national interest over their own profits,” Shehbaz stated. “This decision marks the beginning of a larger transformation—this is the first drop of rain, which will eventually nourish the entire region.” PM Shehbaz extended his gratitude to his team, including the Task Force on Power Sector Reforms, former president Asif Ali Zardari, Chief of Army Staff, and PML-N leader Nawaz Sharif for their instrumental roles in making this breakthrough possible.
The five IPPs affected by this termination include Rousch Power, Saba Power, LALPIR, HUBCO, and Atlas Power. According to the agreement, these IPPs will be compensated for their arrears, but without any additional markup. Specifically, Rousch Power, established under the Build, Own, and Operate (BOO) model, will have its ownership transferred to the government for subsequent privatization by the Privatisation Commission. The remaining four IPPs will retain their ownership, but following the contract terminations, the government will no longer be liable for any further payments.
Shehbaz Sharif highlighted that the termination of these contracts is just the beginning, with ongoing efforts to renegotiate agreements with other IPPs. This gradual reassessment is expected to further reduce power tariffs across the country.
The prime minister also took the opportunity to express his gratitude to the Pakistani people for their resilience in the face of inflation, noting that inflation had been reduced from a staggering 30% to 6.9% within just seven months—well ahead of the government’s 2025 target.
He emphasized that the country’s economic revival is progressing rapidly, fueled by the government’s relentless efforts to provide public relief. Additionally, PM Shehbaz praised expatriate Pakistanis for their confidence in the government’s policies, as evidenced by the record $8.8 billion in foreign remittances sent during the last fiscal quarter.
In closing, the prime minister mentioned a federal subsidy of Rs 50 billion for power consumers using up to 200 units, as well as an additional subsidy from the Punjab government aimed at supporting consumers utilizing 201 to 500 units during the summer months.