Government Cancels Agreements with Six Independent Power Producers for Public Relief

The government of Pakistan has terminated agreements with six Independent Power Producers (IPPs), signaling a push for major energy sector reforms. The contracts, primarily with IPPs operating under Build-Own-Operate and Build-Operate-Transfer models, were ended voluntarily by the companies, saving the country Rs. 411 billion in potential future payments. This move is part of the government’s efforts to reduce electricity costs and provide relief to consumers facing high inflation .

Among the impacted entities are major players like Saba Power, Hubco, Atlas Power, and Lalpir, which will retain ownership of their assets but cease receiving government payments under their original contracts. Rousch Power, on the other hand, will shift to government ownership for eventual privatization. This restructuring is seen as a step toward improving the financial sustainability of the power sector while addressing public concerns over inflated electricity bills .

Prime Minister Shehbaz Sharif commended the decision, emphasizing its importance in stabilizing the national economy and reducing inflation. Over the past quarter, inflation has dropped from over 30% to 6.9%, partly attributed to such cost-cutting measures. The government also highlighted record-high remittances from overseas Pakistanis as a factor in economic recovery, with $8.8 billion received during the last quarter .

The cancellations are expected to pave the way for renegotiations with other IPPs and additional reforms. Officials believe these steps will gradually lower electricity tariffs, easing the financial burden on households and industries. While some critics express concern over the long-term impact on energy investments, the administration remains committed to balancing affordability with sector sustainability.