Government mulls IPPs closure to reduce power tariffs

The federal government has initiated plans to reduce the current electricity tariffs through a series of proposals and measures, acknowledging the significant financial risks faced by the power sector.

According to sources, the government is working on multiple strategies to rationalise electricity rates, which include reducing allocations in development budgets at both federal and provincial levels.

Additionally, the government is considering shutting down domestic Independent Power Producers (IPPs) in both public and private sectors.

However, the International Monetary Fund (IMF) has not yet endorsed the power rationalisation plan.

Resistance within the government is also emerging, with some key officials expressing concerns that the plan may not be feasible and may fail to provide a permanent solution to the structural issues plaguing the loss-making power sector.

High-level sources indicated that non-CPEC IPPs are being targeted for capacity charge payments through various instruments.

The government aims to create significant fiscal space by cutting down on the Public Sector Development Programme (PSDP) at the federal level and Annual Development Plans (ADPs) of provincial governments.