Pakistan Calls for Review of Power Output Contracts with Chinese Firms

Pakistani Minister for Power Awais Leghari has announced that existing contracts with Chinese firms involved in power production in Pakistan require reassessment. Speaking to VOA on Sunday, Leghari indicated that the terms governing these agreements, particularly with independent power producers (IPPs), need to be revisited.

Leghari highlighted that Pakistan’s financial challenges have been exacerbated by the high costs associated with power consumption and ongoing repayments for project loans. The country, struggling to boost industrial growth, faces substantial energy bills and is in the process of repaying significant debts, including over USD 15 billion owed to Chinese power plant operators, VOA reported.

Local independent power plants in Pakistan operate under similar contract conditions as their Chinese counterparts. In response, Leghari noted that the government is negotiating with Chinese officials to adjust the terms of these agreements, including efforts to shift from coal-fired power plants to those using domestically produced fuel. He emphasized that these changes aim to reduce electricity tariffs for consumers.

The Pakistani government is also seeking to reschedule payments to Chinese power plant owners as part of its broader economic reform strategy to secure an IMF bailout. Pakistan recently reached a staff-level agreement with the IMF for a three-year USD 7 billion loan program, and both China and the IMF are advocating for comprehensive reforms in Pakistan’s power sector.

According to VOA, as part of the new approach, Chinese power plant owners have agreed to use local coal in three of their facilities instead of importing it. This move is expected to help Pakistan save millions of dollars. However, some experts have expressed concerns that this shift could lead to increased profit margins and higher insurance premiums for Chinese investors, potentially diminishing the anticipated savings.

Leghari dismissed these concerns, asserting that the changes will create a “win-win situation” for all parties involved. He stressed that Pakistan’s approach to revising contracts is intended to foster mutual consent and confidence among investors.

Despite challenges such as inadequate infrastructure for transporting coal and the lower quality of local coal compared to imported alternatives, Leghari remains optimistic. He assured that technical and financial feasibility studies will address these issues and that Pakistan values its investors, promising that all decisions will be made with their interests in mind.

Leghari emphasized that the review of contracts is part of a broader effort to ensure fair and beneficial agreements, reflecting Pakistan’s commitment to economic reform and sustainable development.