Federal Minister for Power Awais Leghari has cautioned against the unilateral termination of agreements with Independent Power Producers (IPPs), warning that such an action could plunge Pakistan into a "Reko Diq-like situation."
His comments came during a meeting of the Senate's Standing Committee on Power on Friday, where he addressed concerns related to the ongoing power crisis.
Leghari recalled the 2019 Reko Diq case, where Pakistan narrowly avoided an $11 billion penalty through an out-of-court settlement with Barrick Gold.
The minister said that the contracts with IPPs, often blamed for soaring power tariffs, carry sovereign guarantees, which make unilateral action risky and potentially disastrous.
In response to questions from Senator Mohsin Aziz, the committee chairman, who expressed disappointment with the minister's stance, Leghari stressed that the government would not take any steps regarding the IPPs without mutual consent.
He noted that a task force, under his leadership, is currently reviewing the IPP contracts and exploring viable solutions.
Responding to another question from committee member Haji Hidayatullah Khan, Leghari acknowledged that while there is a desire to end contracts with certain IPPs that are no longer needed, doing so without mutual agreement would open a "Pandora's box" of legal challenges.
He referenced ongoing court cases involving IPPs related to the controversial Muhammad Ali report.
Leghari assured the committee that efforts are underway to find a resolution, hinting that positive developments could be on the horizon.
Analysts have long criticised the Power Purchase Agreements (PPAs) with IPPs, many of which were signed without adequate consideration of their long-term impact.
The contracts have contributed significantly to Pakistan's power sector woes, with energy users burdened by some of the highest electricity bills globally, where taxes and capacity fees constitute 70% of the charges.
Over the past 15 years, the country has incurred nearly Rs5,082 billion in losses due to the government's failure to address the growing circular debt problem, which results in an annual loss of Rs370 billion.
Since July 2018, the power purchase price has surged by 95.82%, with the duration of these IPP contracts extending until around 2050.
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