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Islamabad, Pakistan – In a bid to alleviate the burden of soaring energy costs, Pakistan has initiated renegotiations with independent power producers (IPPs) to revise existing contracts and reduce electricity cost.
Power Minister Awais Leghari stated that the current power tariff structure is “unsustainable” and that all stakeholders must make concessions to achieve a mutually beneficial solution.
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The government aims to transition from a capacity-based model to a take-and-pay model, with proposed conditions including reduced guaranteed returns, capped dollar rates, and elimination of payments for unused power.
The renegotiation process is crucial to addressing the energy sector’s viability, a key requirement for the International Monetary Fund’s (IMF) $7 billion bailout package.
Pakistan is also exploring debt restructuring options with China and implementing structural reforms to eliminate power sector subsidies.
The ultimate goal is to reduce commercial power tariffs to 9 U.S. cents per unit, enhancing regional competitiveness and supporting economic growth.
The move comes as households and businesses struggle with rising power tariffs, which have sparked social unrest and shuttered industries in the $350 billion economy.