Energy Ministry Reports Rs9 Billion Circular Debt Reduction and Tariff Cuts

A beacon of progress illuminates the horizon! The Ministry of Energy (Power Division) has apprised the National Assembly of commendable advancements in addressing the financial tribulations plaguing Pakistan’s energy sector, with the circular debt diminished by Rs9 billion during the initial six months of the current fiscal year.

The ministry disclosed that the circular debt, which stood at Rs2,393 billion as of June 2024, had been pared down to Rs2,384 billion by December 2024. This reduction owes much to the government’s resolute initiatives to resolve the sector’s fiscal challenges.

Responding to an inquiry from MNA Rai Hassan Nawaz Khan, the Power Division revealed that free electricity units are still being furnished to employees of associated corporate entities, notwithstanding unresolved legal disputes. Furthermore, the national average electricity tariff has been curtailed from Rs48.70 per unit in June 2024 to Rs44.06 per unit by January 2025, reflecting a notable 10 percent reduction of Rs4.64 per unit.

The Minister for Energy elaborated on efforts to alleviate energy sector costs, noting that the termination of contracts with six Independent Power Producers (IPPs) is poised to yield savings of approximately Rs411 billion. These actions form part of a comprehensive task force endeavour to institute structural reforms in the power domain. Consequently, Power Purchase Agreements with six IPPs have been rescinded, tariffs for eight bagasse-based power plants have been adjusted, and fourteen thermal IPPs have consented to lower their charges.

The minister, Leghari, affirmed that these revisions would generate savings of Rs238 billion from the amended bagasse plant tariffs and Rs922 billion from the thermal IPPs over the projects’ remaining duration. The government is steadfast in its aim to reduce electricity tariffs for consumers, anticipating a significant decline in the average tariff by April 2025.

The Energy Minister underscored that the International Monetary Fund (IMF) has endorsed these power sector reforms, integral to the Extended Fund Facility (EFF) programme. Following these measures, the national average consumer-end tariff, recorded at Rs48.70 per unit in June 2024, is projected to decrease to Rs45.05 per unit by April 2025, with further reductions to Rs37.64 per unit, as proclaimed by Prime Minister Shehbaz Sharif.