New agreement with IPPs to ensure cheap electricity, says Faraz

ISLAMABAD: Minister for Information and Broadcasting Shibli Faraz on Saturday said that the new agreement with Independent Power Producers (IPPs) would enable the government to purchase cheap electricity from private companies and provide electricity to end consumers at lower rates.

The information minister said this while addressing a press conference. Special Assistant to the Prime Minister on Power Sector Shahzad Qasim was also present on the occasion.

The information minister said that a basic agreement has been signed with IPPs which is the first major step towards providing cheap electricity to the consumers.

He said that the previous governments had failed to negotiate with the IPPs and expensive power contracts were signed adding that it was not possible to undo such contracts unilaterally.

He said Prime Minister Imran Khan wanted to address the issue of expensive electricity on an immediate basis due to which a team was constituted which held negotiations with the IPPs to revisit the old contracts.

The information minister said that under the new agreement signed with the IPPs payments will only be made for the electricity acquired and consumed instead of the total installed capacity of a particular power plant.

Faraz added that the return on equity will now be paid in Pakistani rupee rather than the US dollar.

He informed that the government intends to enhance the share of renewable energy to 20 to 25 per cent in the overall energy mix by 2030, which will help ease dependence on petroleum fuel and reduce the cost of electricity production.

Similarly, Shahzad Qasim highlighted that one of the key milestones achieved in the latest Memorandum of Understanding (MoU) signed with the IPPs is that fuel efficiency tests of plants will be held and their results will be shared with the electric power regulator.

“The IPPs would not only have to follow the prescribed limit of National Electric Power Regulatory Authority (NEPRA) but the savings would also have to be shared with the government,” he said adding that it would help reduce the cost of electricity.

He highlighted that earlier the late payment surcharge to be paid by the government to the IPPs was Kibor plus 4.5 per cent which has now been reduced to Kibor plus 2 per cent.

The special assistant to the prime minister said that the government is working to change the whole power purchase regime with the IPPs as the current system guarantees payment of electricity to the power producers as per their installed capacity even if the actual purchase of electricity was much lower.

“It will take between one and two years to devise a new power purchase regime,” he added.

He added that past dues of the power producers would be cleared by the government and the MOU would only be applicable after the dues are cleared.

Shahzad Qasim said that the tariffs of various hydro power plants of Water and Power Development Authority are being rationalised at a uniform rate since currently different projects have different rates of return.

- Advertisement -
Ghulam Abbas
The writer is a member of the staff at the Islamabad Bureau. He can be reached at [email protected]


  1. Honorable Minister Information & BroadCasting Shibli Faraz Compliments on “Agreements signed with IPP’s Payments will ONLY be made for the Electricity Acquired/Consumed” instead of the total installed capacity of a particular power plant.”

  2. A good step by the Government. Though why this step is taken for local power plant owners. Why the CPEC projects are not included. Further, when will the Government learn from its mistakes and change the power policy. The new power plants coming online are being given the same dollar based return and capacity payments.

Comments are closed.

- Advertisement -

Must Read

U Microfinance Bank planted 5,000 trees

U Microfinance Bank in collaboration with the Capital Development Authority (CDA) organized a tree plantation drive on 12th August, 2022 at G-8/1 Islamabad. To celebrate the...