Federal Energy Minister Awais Ahmed Khan Leghari has defended independent power producers (IPPs), arguing that these private entities are not responsible for the rising cost of electricity in the country.
“The IPP policy is not the cause of expensive electricity,” Leghari told Voice of America during an exclusive interview. “The high cost of electricity is not due to any government or past policies [either] but rather a result of the poor economic situation of the country”.
According to the minister, the biggest impact on electricity prices came from the significant depreciation of the rupee, which alone led to an increase of Rs 8 per unit.
Defending the OPP policy, the energy minister said that when the country was experiencing an electricity crisis, a country made investments on terms that were unprecedented globally, and therefore, the spirit of these agreements cannot be changed.
“When IPPs invest in dollars, payments must also be made in dollars. What country borrows in dollars and repays in local currency?” he asked.
The minister said the government will not unilaterally terminate or change agreements with the PPAs. However, she negotiates new terms with them, explaining her limitations.
“Whether the PPPs are local or foreign, their deals are being reviewed by mutual consent and progress on this issue is actively continuing. The nation will hear good news about PPPs within the next one to two months,” he added.
Leghari said that as a result of energy sector reforms, electricity prices in Pakistan will soon be comparable to other countries in the region.
“The high cost of electricity is not due to the cost of production but rather the rental and repayment of loans for power plants, which makes electricity expensive and affects the public’s income,” he said. “People are forced to spend their savings to pay their electricity bills.”
The minister said that during Prime Minister Shehbaz Sharif’s visit to China, it was agreed to “re-profile” the Chinese loans provided for the energy sector in Pakistan. In addition, Chinese companies operating power plants will use local coal instead of imported coal.
He said that these two measures are implemented after an agreement with Chinese energy companies. Regarding late payments to Chinese companies, Leghari noted that 90% of fees are paid on time, with delays occurring in only about 10% of payments.
He said that improvements in foreign exchange reserves have also balanced payments and this issue is expected to be resolved in the coming days.
Leghari urged other provinces to follow Punjab’s example and take measures to provide relief to people on electricity bills. He suggested that sections of society whose income is largely consumed by electricity bills should be protected by provincial governments.
“If the provincial governments take on the additional burden of providing affordable electricity to the public, they will not have to pay a very large amount.
“Punjab has allocated Rs 45 billion from its development budget to provide a discount of Rs 14 per unit to the poor and middle class. If Sindh follows this approach, it would require Rs 10 billion and Khyber Pakhtunkhwa would require Rs 8 billion” , he said.
He said switching power plants from imported coal to local coal is a major change. A railway line is being laid to transport coal extracted from Tharparkar to the power plants.
Legari said the government is now working to improve the electricity transmission system and has allocated funds for it in the budget.
He rejected the view that increasing the installation of solar panels on homes is reducing the burden on the national grid and leading to higher electricity costs. “If managed responsibly, solar panels could provide electricity to domestic users without causing problems on the national grid.”
He said that the government is working to attract international export industries to Pakistan to increase the demand of electricity in the national grid.
Leghari noted that the United States has been a partner in Pakistan’s energy sector for 50 years, with most of the country’s hydropower projects having been established with American assistance. “I hope the US will support Pakistan in reorganizing its electricity transmission system,” he said.
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