The Pakistani government has addressed concerns regarding the renegotiation of contracts with Independent Power Producers (IPPs), emphasizing that these discussions are voluntary and conducted transparently. Federal Minister for Power Awais Ahmed Khan Leghari assured international development partners, including the World Bank and the International Monetary Fund, that IPPs have the option to disengage from negotiations or pursue arbitration and forensic audits if desired.
This clarification comes in response to criticisms from several development finance institutions, such as the International Finance Corporation and the Asian Development Bank, which expressed concerns over Pakistan’s approach to renegotiating wind and solar power contracts. These institutions argue that unilateral actions could undermine investor confidence and hinder the sector’s long-term development.
Minister Leghari highlighted that the renegotiations aim to address flaws in existing agreements, which have led to substantial capacity payments without corresponding electricity generation. Consumers currently bear costs ranging from Rs2.5 trillion to Rs2.8 trillion annually for non-operational IPPs. The government’s objective is to rationalize electricity tariffs, making them more competitive and affordable, particularly for industrial consumers.
In line with these efforts, the government has reportedly saved approximately Rs1.5 trillion by revisiting IPP contracts, including the termination of certain agreements and tariff revisions for specific plants. Ongoing discussions with 45 public sector power plants aim to further reduce costs.
Despite the government’s assurances, development partners continue to monitor the situation closely, emphasizing the importance of honoring contractual commitments to maintain investor trust and ensure the sustainable growth of Pakistan’s energy sector.
