The federal cabinet has made a significant decision to protect consumers from high electricity costs by approving the termination of contracts for purchasing electricity with five independent power producers (IPPs).
Approving the recommendations of the task force, the move is expected to save consumers Rs60 billion annually and reduce the financial burden on the national treasury by Rs411 billion.
In the first phase of the initiative, the Cabinet approved the cancellation of power purchase agreements with Lalpir, HUBCO, Rousch Power Limited, Saba Power, and Altas Power. These IPPs were initially contracted to supply electricity under various agreements, but the government is now ending the arrangements to alleviate the burden of capacity payments on consumers.
According to official sources, the termination of these contracts will lead to a significant reduction in per-unit electricity tariffs. The government will not be required to make any interest payments on outstanding dues to these IPPs.
One of the key developments in this process is the government's decision to take over Rousch Power, which was established under a build-own-operate-and-transfer agreement. After the ownership is transferred to the government, the plant will be privatized. However, ownership of the remaining four IPPs will remain with their current owners.
Prime Minister Shehbaz Sharif hailed this decision as a positive step towards economic stability and a fulfilment of the party's manifesto commitment to provide relief to the public. "With the grace of Allah, the country's economy is rapidly moving towards stability. This decision reflects our commitment to reducing tariffs and revising agreements with other IPPs in the future," he stated.
The PM declared that the government will reduce tariffs by gradually revising agreements with other IPPs.
On the other hand, Hub Power has announced the early termination of its 1,292MW power plant in Balochistan, with the company's board of directors approving the decision. A settlement was also reached between the company and the government on early payments.
Additionally, Lalpir Power is also ready to shut down its 362MW power plant. The company has announced the convening of the annual meeting of the board for approval. The Hub Power Plant contract with the government was till March 2027, but was prematurely terminated on October 1.
Sources indicate that three more IPPs are expected to announce the early termination of their contracts soon. With the closure of these power plants, a total reduction of 2,200MW is anticipated, leaving a surplus of 20,000MW of electricity in the country's grid.
