In a recent development, the ministries of finance and energy have put forward recommendations to tackle the mounting pressure caused by staggering circular debt.
Sources close to the matter have revealed that one of the proposed solutions is to pay Independent Power Producers (IPPs) a lump sum of Rs4 trillion in capacity charges. This collective payment is aimed at easing the pressure on circular debt and could potentially bring electricity prices down by Rs5 per unit.
The payment is expected to be made over a period of three to five years, providing much-needed relief to frustrated electricity consumers. However, the Finance Ministry is tasked with arranging financing for this whopping payment to the IPPs.
A final decision on this matter is expected after consultations with the International Monetary Fund (IMF). The government is also exploring other measures to reduce the burden of power bills, including shifting imported coal-run plants to local coal, improving the power supply system, and increasing the use of renewable energy sources.
The move to pay IPPs in one go is seen as a bold step towards addressing the circular debt issue, which has been a major challenge for the power sector in Pakistan. The government is keen to find a solution to this problem, which has resulted in high electricity prices and frequent power outages.
By paying the IPPs upfront, the government hopes to reduce the circular debt and bring down electricity prices, providing relief to consumers and industries alike. However, the success of this plan depends on various factors, including the ability to arrange financing and the response from the IMF.
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