Govt plans Rs12/unit electricity tariff cut by March 2025

The government plans to reduce electricity tariffs by Rs 12 per unit by March 2025 through renegotiations with Independent Power Producers (IPPs), government power plants (GPPs), and renewable energy providers. 

The News reported, citing official sources, that the proposed measures include restructuring existing contracts and debt reprofiling, potentially saving up to Rs300 billion annually.

In the first phase, contracts with six IPPs, including Hubco Power, Rousch Power, AES Lalpir Power, Saba Power Plant, Atlas Power, and Pakgen Power Limited (365 MW), have been terminated. The government will saved Rs400 billion in capacity payments through these measures. 

Talks with 18 IPPs to convert their agreements to a “Take and Pay” model are nearing completion, with 15 IPPs already signing revised contracts.

Discussions are also ongoing with IPPs like Halmore Power Generation and Orient Power Company, which have raised concerns over contract revisions. 

Once IPP negotiations are finalized, discussions will extend to government power plants, including nuclear, hydropower, coal, and RLNG-based facilities, as well as provincial power plants and GENCOs. The process will conclude with renewable energy providers, including wind and solar plants, by February 2025.

A senior official revealed that Rs3 per unit reduction is anticipated through renegotiations with IPPs and renewable energy sources, while debt reprofiling with the Chinese government could bring an additional Rs4 per unit cut. 

The Finance Ministry is also considering reducing taxes on electricity bills by Rs500 billion, potentially lowering tariffs by another Rs5 per unit.

If successful, the off-peak tariff could decrease from Rs41.68 to Rs29.68 per unit, and the peak-hour tariff from Rs48 to Rs36 per unit. 

The Federal Board of Revenue (FBR) currently collects Rs800 billion annually through electricity bills, but the Power Division has urged a reduction to Rs300 billion.