ISLAMABAD: Prime Minister Shehbaz Sharif announced on Thursday that the federal government would terminate contracts with five Independent Power Producers (IPPs) in the first phase, aiming to provide relief to people struggling with inflation.
This decision comes in response to public outrage over high electricity bills, which prompted the Shehbaz-led administration to reassess agreements with IPPs, as capacity payment charges are a component of the bills.
“Consumers will save Rs60 billion annually, and the national exchequer will save Rs411 billion. These five IPPs prioritized the nation’s interests over their own. The ‘take or pay’ system is no longer applicable to them,” the prime minister told his cabinet members.
During the cabinet meeting, PM Shehbaz also mentioned that tariffs would be reduced by revising agreements with other IPPs in the power sector gradually.
He highlighted that inflation, which had been over 30% in the same month the previous year, had now dropped to 6.9%. Praising the five IPPs, the prime minister said they played a crucial role in initiating public relief, likening their actions to “the first drop of rain.”
Earlier this month, the IPPs agreed to terminate their contracts at the government’s request. An official involved in the task force on the power sector told The News that the modalities are being finalized, and once complete, all five IPPs will sign the termination agreements.
This move follows the government’s warning last month, urging IPP owners to voluntarily terminate their Power Purchase Agreements (PPAs) or face consequences.
“The entire cabinet, including myself, is grateful to the owners of these IPPs,” the prime minister said, also commending the task force and federal cabinet members for their efforts in reforming the power sector.
PM Shehbaz further emphasized the record increase in remittances from overseas Pakistanis, stating that the $8.8 billion received in the last quarter reflects confidence in the government’s policies.
During the meeting, details of the agreements between the task force and the IPPs—Hubco, Lalpir, Saba Power, Rousch Power, and Atlas Power—were presented to the cabinet. Among these, Rousch Power, established under a build-own-operate-and-transfer (BOOT) agreement, will be privatized by the Privatisation Commission once ownership is transferred to the government.
Ownership of the remaining four IPPs will remain with their current owners, and no payments will be made by the government after terminating the contracts.
