Govt Plans To Reduce Energy Tariffs Up To Rs12 Per Unit by March 2025!

The government has set a target of cutting energy tariffs by Rs 12 per unit by March 2025 in a bid to absorb consumers’ costs. This will be done through power purchase adjustments with the Independent Power Producers (IPPs), government-owned power plants and any renewable energy firm. Out of these, restructuring of contracts and debt reprofiling are expected to achieve annualised expenditure cuts up to Rs 300 billion. During the first phase, contracts with six IPPs including Hubco Power and Rousch Power have been canceled leading to savings of Rs 400 billion in capacity payments. Negotiations with 18 IPPs on switching to the ‘Take and Pay’ model are in its final stage, while 15 IPPs have already signed the modified contracts. 

After IPP negotiations the government will specialise on state operated power plants and renewable energy suppliers for another Rs 3/unit through contractual changes and Rs 4 per unit through debt restructuring with China. Independent power producers, power purchase agreements with wind and solar plants will wrap up by February, 2025. Furthermore, the Finance Ministry has proposed reduction of tax on electricity bills by as much as Rs 500 billion, on top of which further cuts in tariffs may hit Rs 5 per unit. In total, it proposed to reduce the off-peak tariff from Rs. 41. 68 to 29. 68 and the peak hour tariff from 48 to 36 per unit.

At present, the Federal Board of Revenue (FBR) directly gets Rs 800 billion through electricity bills per annum but the Power Division now suggested that it be cut down to Rs 300 billion per annum to make energy rates less costly. Negotiations are still open with power companies like Halmore Power and Orient Power despite the issue of change of some contracts. The government continues with these measures in a bid to accord consumers large scale significant relief and develop a sound energy price structure.

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