ISLAMABAD: Minister for Power Sardar Awais Khan Leghari hinted at on Friday that electricity tariffs may be further reduced during the upcoming tariff rebasing in June 2025; however, fluctuations in fuel prices will still be passed on to consumers through the Fuel Cost Adjustment (FCA).
“If interest rates increase, or the rupee devalues, it will impact the Quarterly Tariff Adjustment (QTA) as it is subject to fluctuations.
Similarly, if dams dry up and hydel generation decreases, or if expensive fuel needs to be purchased or international energy prices rise, these changes will be reflected in the FCA,“ the Minister explained during a press briefing.
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Despite this, he assured that the current reduction in electricity prices is based on solid and sustainable grounds. He noted that the termination of Independent Power Producers’ (IPPs) contracts and the imposition of an additional Rs 10 per litre tax on petroleum products have contributed to an approximate Rs 4 reduction in the price per unit, a decrease that is expected to be sustainable. He further emphasised that the Petroleum Levy (PL) would not be removed.
In response to questions about consumer confusion regarding the impact of price reductions on their bills, the minister clarified that the overall reduction in tariff would amount to Rs 6 per unit, plus a tax of Rs 1.50 per unit, resulting in a total reduction of Rs 7.44 for domestic consumers and Rs 7.69 for industrial consumers.
Additionally, savings of Rs 2 per unit would be realized from the renegotiation of IPP contracts.
He also shared that talks with China regarding the re-profiling of debts and the conversion of power plants to local coal were progressing smoothly.
He indicated that the tariff rebasing in June 2025 could bring further reductions due to the successful implementation of ongoing reforms. “Our reforms are focused on creating a sustainable, long-term reduction mechanism based on efficiency.”
He further explained that if the tariff reductions had been solely based on renegotiated IPP contracts, the International Monetary Fund (IMF), Pakistan’s development partner, would not have supported such significant price cuts.
According to the minister, the IMF had emphasised the importance of continuous reform process, which, once shared and explained, helped build confidence in the power sector’s path toward sustainability.
Leghari also revealed that the Centralised Trading of Bulk Power Market (CTBCM) would be operationalized by the end of the current year. Initially, the government plans to start with a bilateral trade of 800-1000 MW of electricity. “We are optimistic that if our reform process continues at the same pace, we will see significant downward pressure on electricity prices.”
Regarding the current level of circular debt standing at Rs 2.4 trillion, the minister said that talks with banks for loans totalling Rs 1.34 trillion were in the final stages. Once the banks submit their term sheets, agreements will be finalised. This would help reduce circular debt by Rs 300-335 billion. The Debt Servicing Surcharge (DSS) of Rs 3.23 per unit will be used to repay the loans, and both the current and future governments will continue repaying these loans through the DSS.
Furthermore, the minister claimed that the tariff for non-protected consumers using 0-100 units is now lower than that for lifeline consumers.
He stated that poor performance of electricity distribution companies is an issue. In the past, expensive power plants were installed. So far, negotiations have been held with 36 IPPs. This will save Rs. 3696 billion. This saving will be during the life of these power plants from 3 to 25 years.
Nepra Act needs improvement. Future power plants will be built on cheap and competitive bidding. The government will no longer be the only institution for purchasing power. The private sector is responsible for purchasing and selling electricity. There are power supply problems in the country. By solving these problems, electricity can become cheaper by another Rs. 2 per unit, he said.
He added that the circular debt has improved by Rs 339 billion. Electricity distribution companies have reduced their losses, bringing about an improvement of Rs. 145 billion. Electricity prices will drop significantly in the next two to three years.
Negotiations with renewable IPPs are being held in mutual consultation. If no one wants to negotiate, they can go to mediation. The government has also an option that should not be discussed. We can do a forensic audit. A forensic audit of an IPP is also under way. Electricity will not be purchased except on least cost basis, he said.
Copyright Business Recorder, 2025
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