IPPs not to blame for tariff hike: Leghari

Power minister says govt negotiating new terms with independent power producers

Federal Minister for Energy Awais Ahmed Khan Leghari has defended the independent power producers (IPPs), asserting that these private entities are not responsible for the rising cost of electricity in the country.

"The IPP policy is not the cause of expensive electricity," Leghari told Voice of America during an exclusive interview. "The high cost of electricity is not due to any government or past policies [either] but rather the result of the country's poor economic condition."

According to the minister, the greatest impact on electricity prices has come from the significant depreciation of the rupee, which alone has led to an increase of Rs8 per unit.

Defending the IPP policy, the energy minister stated that when the country was experiencing an electricity crisis, one country made investments under terms that were unprecedented globally, and thus, the spirit of those agreements cannot be altered.

"When the IPPs invested in dollars, payments must also be made in dollars. Which country borrows in dollars and repays in local currency?" he asked.

The minister said the government will not unilaterally terminate or alter agreements with the IPPs. However, it is negotiating new terms with them, explaining its constraints.

"Whether the IPPs are local or foreign, their agreements are being reviewed with mutual consent, and progress in this regard is actively ongoing. The nation will hear good news regarding IPPs within the next one to two months," he added.

Leghari said that as a result of reforms in the energy sector, electricity prices in Pakistan will soon be comparable to those in other countries in the region.

"The high cost of electricity is not due to production costs but rather due to the rental and repayment of loans for power plants, which is making electricity expensive and affecting the common person's income," he said. "People are forced to spend their savings to pay their electricity bills."

The minister said during Prime Minister Shehbaz Sharif's visit to China, it was agreed to "re-profile" the Chinese loans provided for the energy sector in Pakistan. Additionally, Chinese companies operating power plants will use local coal instead of imported coal.

He stated that these two measures are being implemented following an agreement with Chinese energy companies. Regarding delays in payments to Chinese companies, Leghari noted that 90% of dues are being paid on time, with delays occurring in only about 10% of payments.

He said improvements in foreign exchange reserves have also balanced payments, and this issue is expected to be resolved in the coming days.

Leghari urged other provinces to follow Punjab's example and take measures to provide relief to people on their electricity bills. He suggested that segments of society whose income is largely consumed by electricity bills should be protected by provincial governments.

"If provincial governments take on the additional burden of providing affordable electricity to the public, they will not need to pay a very large sum.

"Punjab has allocated Rs45 billion from its development budget to provide a discount of Rs14 per unit to the poor and middle class. If Sindh follows this approach, it would require Rs10 billion, and Khyber Pakhtunkhwa would need Rs8 billion," he said.

He said transitioning power plants from imported coal to local coal is a significant change. A railway line is being laid to transport coal extracted from Tharparkar to the power plants.

Leghari said the government is now working on improving the electricity transmission system and has allocated funds for it in the budget.

He rejected the notion that an increase in the installation of solar panels at homes reduces the burden on the national grid and results in higher electricity costs. "If managed responsibly, solar panels could provide electricity to domestic users without causing issues for the national grid."

He said the government is working to attract international export industries to Pakistan to increase electricity demand on the national grid.

Leghari noted that the United States has been a partner in Pakistan's energy sector for 50 years, with most of the country's hydropower projects established with American assistance. "I hope that the US will support Pakistan in reorganizing its electricity transmission system," he said.