The federal government has unveiled a new formula aimed at reducing electricity prices by up to Rs20 per unit. According to official estimates, this significant reduction is achievable through the renegotiation of agreements with Independent Power Producers (IPPs), which alone could bring down prices by Rs9.70 per unit.
The government’s working paper reveals that agreements with six IPPs will be terminated, and negotiations with 14 others have been successfully completed. This move is expected to pave the way for a notable cut in electricity costs. The government also intends to introduce an “Electricity for Payments” policy to private power plants, which will further reduce capacity payments and bring substantial savings for consumers.
Also Read: Government Terminates Contracts with Five IPPs to Reduce Electricity Tariffs
If the IPPs agree to this new policy, capacity payments, which currently amount to Rs1,916 billion annually, could be halved, potentially saving Rs967 billion. A summary of these proposals is expected to be submitted to the Cabinet in the coming week for approval.
In addition to revising IPP agreements, the Ministry of Energy is actively working on eliminating eight different taxes currently imposed on electricity bills, which cost consumers Rs954 billion annually. Removing these taxes could result in an additional Rs9 per unit reduction in electricity prices.
Further cost-cutting measures include switching coal-fired power plants from imported coal to local coal, which would reduce electricity prices by another Rs2 per unit. The government’s strategy, if fully implemented, promises substantial relief for consumers and industries alike.
In a recent cabinet meeting, the Prime Minister emphasized the importance of reducing electricity prices to foster growth in industries, agriculture, and exports. He confirmed that discussions are ongoing with the IMF to explore further options, and additional meetings will be held to expedite the process.
