Energy Minister Awais Leghari has confirmed that the coalition government is actively negotiating with independent power producers (IPPs) to address the “unsustainable” electricity tariffs that have sparked social unrest and hurt industries in Pakistan’s struggling economy. In an interview with Reuters, Leghari emphasized that the current power price structure is untenable and that all stakeholders must make concessions without undermining business viability.
The negotiations aim to reduce high guaranteed returns, cap dollar rates, and eliminate payments for unused power, addressing the economic burden of excess power capacity and fixed costs passed on to consumers. The government’s move follows a critical agreement with the International Monetary Fund (IMF) for a $7 billion bailout, which highlighted the need to revisit power sector deals.
Leghari stressed the importance of reducing tariffs to a more competitive level—9 US cents per unit for commercial users, down from the current 28 cents—to support growth and make power prices regionally competitive. Despite the government’s efforts, unilateral changes to IPP contracts are unlikely due to legal and financial constraints, with the potential for significant economic repercussions similar to the Reko Diq mining dispute.
The country has faced significant losses due to circular debt, with nearly Rs5,082 billion in losses over the past 15 years, exacerbating the need for urgent reforms in the power sector.