Federal Cabinet Decides to End Contract with 5 IPPs
Prime Minister Highlights Economic Stability and Record Remittances in Quarterly Report
A special meeting of the Federal Cabinet chaired by Prime Minister Shehbaz Sharif was held in Islamabad on Thursday, in which approval was given to cancel the contracts of 5 IPPs.
Charing the meeting, Prime Minister Shehbaz Sharif announced that contracts with five Independent Power Producers (IPPs) have been terminated, a move expected to save the national exchequer 411 billion rupees and provide an annual benefit of 60 billion rupees to the public.
Prime Minister Shehbaz Sharif has shared promising updates on Pakistan’s economic progress, stating that the country is gradually moving toward stability. In a recent statement, he revealed that Pakistan’s quarterly remittances have reached a record $8.8 billion, the highest in any quarter to date.
He credited this achievement to the trust of overseas Pakistanis in the country’s economy, noting that this influx is an indication that the economy is now on the path to recovery. However, the Prime Minister acknowledged that there is still a long way to go, and challenges similar to those in the past may arise. He praised the government’s efforts over the last seven months in addressing these challenges, expressing gratitude for the team’s resilience and for the divine blessings that have followed.
Acknowledging Public Sacrifices and Providing Relief
The Prime Minister also took a moment to recognize the immense hardships faced by the common people due to inflation, high banking policy rates, and rising prices of essential commodities. He thanked the citizens for their patience and resilience during these difficult times.
To provide some relief, he mentioned that the federal government allocated 50 billion rupees to offer electricity subsidies to households consuming up to 200 units during the summer, which has provided significant support. Additionally, in Punjab, Chief Minister Maryam Nawaz Sharif allocated over 50 billion rupees to extend relief for two months to consumers using 400 to 500 units of electricity.
These measures, according to the Prime Minister, demonstrate that both the federal and provincial governments are fully aware of the public’s struggles and are doing everything possible to ease their burden.
Inflation Control Efforts
The Prime Minister highlighted that inflation, which stood at 32% last year, has now reduced to 6.7%. He emphasized the government’s ongoing efforts to further alleviate inflationary pressures, focusing on bringing prices down as much as possible.
Termination of IPP Contracts and Energy Sector Reforms
Shehbaz Sharif also touched upon the historical challenges in Pakistan’s energy sector, including contracts with Independent Power Producers (IPPs), electricity theft, and transmission line losses, which have prevented the government from offering significant relief in energy prices. However, he expressed optimism, saying that overcoming these obstacles will allow the government to provide energy subsidies to the public.
He acknowledged the public’s frustrations over past agreements with IPPs, noting that many of these companies had already reaped substantial profits, even recovering their initial investments. The Prime Minister called this a valid concern from the common man.
Announcing the Termination of IPP Contracts
In an important development, the Prime Minister announced that the government had successfully terminated power purchase agreements with five IPPs. Led by a task force under Owais Leghari, these negotiations resulted in a mutual agreement with the IPPs to end the contracts. The Prime Minister expressed gratitude to the IPP owners, who voluntarily prioritized national interest over personal gain.
As a result of this termination, the public will benefit from an annual savings of 60 billion rupees, while the national treasury will save 411 billion rupees. Furthermore, the cancellation of these agreements is expected to lead to a reduction in electricity prices for consumers.
Industry and Energy Price Outlook
In related news, business tycoon and Chairman of the Trade Development Authority of Pakistan, Zubair Motiwala, stated that Army Chief General Asim Munir had assured that the per-unit cost of electricity would be reduced to 9 to 10 cents, offering much-needed relief to industries. While gas prices may not decrease, a drop in electricity prices is anticipated, helping industries facing shutdowns.
Federal Cabinet Meeting Approvals and Future Plans
Meanwhile, reports indicate that the federal cabinet will approve several important agreements in the coming days. These include memorandums of understanding (MoUs) and contracts with various countries, as well as investment deals with Saudi and Chinese companies.
The cabinet will also review a report on lifting the import ban on monosodium glutamate and discuss reconstituting the Pharmacy Council and appointing private members to the NAVTTC board.
Additionally, the cabinet is likely to approve the 2024-25 budget for the state of Jammu and Kashmir in its next session.