Rs3,696bn saved in IPP deal, electricity tariff relief ahead: minister

ISLAMABAD: Minister for Energy Awais Leghari has announced significant reforms in the power sector, stating that Rs3,696 billion have been saved through negotiations with Independent Power Producers (IPPs). He said that this relief would be passed on to the public through reduced electricity bills.

Briefing the media, Leghari highlighted key initiatives and challenges in the energy sector. He said that negotiations with 36 IPPs resulted in substantial savings, which would provide long-term relief to consumers in the coming years.

Key Challenges and Measures

The minister identified high production costs as the biggest challenge in the power sector, worsened by tariff hikes and circular debt amounting to Rs2,400 billion. He also pointed to the poor performance of distribution companies (DISCOs) and a lack of coordination as major hurdles, along with a continuous decline in electricity demand.

Leghari noted that transmission line losses contribute to an increase of Rs1 to Rs2 per unit in electricity prices. To address this, corrective measures have been planned.

He announced a reduction of Rs6.14 per unit in electricity tariffs for 18.9 million consumers using up to 100 units, with an overall reduction of up to 56 per cent in their rates.

Reforms and Future Plans

The minister stated that circular debt would be eliminated within six years and eventually brought to zero. He also highlighted ongoing efforts to replace all electricity meters with automated systems and the privatization of IESCO, FESCO, and GEPCO, with LESCO, MEPCO, and HESCO to follow in the second phase. Additionally, he said 27,000 tube wells will be converted to solar energy within seven months.

Under the China-Pakistan Economic Corridor (CPEC), Chinese power plants will focus on coal-based electricity generation, he said.

From July to December, DISCOs were expected to incur losses of Rs303 billion, but Rs145 billion was saved, reducing the losses to Rs158 billion. Meanwhile, Rs9 billion was saved in the circular debt sector.

Long-Term Strategy

Leghari emphasized that instead of purchasing expensive electricity, the government was working on sustainable solutions. “A comprehensive 10-year electric policy is being developed to stabilize the power sector,” he said.

On base tariffs, he said it was too early to predict whether they would increase or decrease by June, as all changes are regulated by the relevant authority. “The Rs7.41 per unit relief provided also includes adjustments in the base tariff,” he noted, refraining from making any definitive predictions about future tariff changes.