Govt 'mulls options to reduce power tariffs by up to Rs10 per unit'

ISLAMABAD: The federal government has started working on various options, including tariff revision for eight power plants, to reduce power rates by up to Rs10 per unit, Geo News reported citing sources on Tuesday.

According to the sources, the government’s first option involves negotiating with Independent Power Producers (IPPs) to pass on the benefits to the public.

By terminating agreements with five IPPs, the government is projected to save a total of Rs411 billion, with an annual saving of Rs70 billion.

Sources within the Ministry of Energy have disclosed that revising the tariff for eight bagasse-based power plants could result in total savings of Rs238 billion, translating to an annual reduction of Rs8.83 billion.

Additionally, the termination or modification of contracts with 16 more IPPs would result in a further benefit of Rs481 billion.

These savings will be passed on to consumers in the form of reduced electricity costs.

The sources further said that the federal government is also considering an extension of the Winter Electricity Relief Package, as well as proposals to reduce taxes on electricity bills.

The government currently generates over Rs800 billion annually from taxes levied on electricity bills.

The development comes as the Prime Minister Shehbaz Sharif-led government has time and again stressed on reducing the exuberant electricity prices.

Apart from finalising the terminating of contracts with five IPPs last year, the government, last month, also completed the negotiations with RFO-based plants under "take and pay" terms.

Islamabad, as reported, aims to slash electricity tariffs by Rs12 per unit by March 2025 through agreements with the IPPs and renewable energy sources like wind and solar power plants.

"We will be able to reduce the power tariff by Rs3 per unit through talks with IPPs, GPPs, wind and solar power plants. And the debt re-profiling will further help reduce the tariff by Rs4 per unit," a senior government official told the publication in December 2024.

"The government’s functionaries want to reduce the taxes on electricity bills with an impact of Rs5 per unit. This is how the off-peak tariff of Rs41.68 per unit would drop to Rs29.68 per unit and the peak-hour tariff of Rs48 would reduce to Rs36 per unit," he added.