The federal government is working to reduce electricity prices by Rs. 6-8 per unit within the next two months.
Rising electricity costs have become a major issue, with opposition parties blaming the government for its handling of the energy sector and independent power producer (IPP) agreements.
Federal Secretary for Energy Dr. Muhammad Fakhr-e-Alam Irfan informed the Senate Standing Committee on Power that the government is considering tax cuts on electricity bills but will need IMF approval.
To lower costs, the government has renegotiated deals with IPPs and saved Rs. 700 billion, including Rs. 300 billion in reduced interest payments. Agreements with six IPPs have been terminated. So far, negotiations with 25 others to run on a take-and-pay model have been completed.
The federal government is trying to negotiate with banks for a Rs. 1.24 trillion loan agreement to reduce the Rs. 2.381 trillion circular debt. Authorities want to take advantage of the declining discount rate which has dropped from 22 percent to 12 percent. They want the loan at a 6-7 percent interest rate for seven years, but banks are proposing a KIBOR+1 rate.
The borrowed funds will be repaid through the existing Rs. 3.23 per unit debt servicing surcharge on electricity tariffs.
