KARACHI: Pakistan is renegotiating contracts with independent power producers to rein in “unsustainable” electricity tariffs, the head of the Power Ministry says, as households and businesses buckle under soaring energy costs.

Rising power tariffs have stirred social unrest and shuttered industries in the US$350bil economy, which has contracted twice in recent years as inflation hit record highs.

“The existing price structure of power in this country is not sustainable,” Awais Leghari, a federal minister heading Pakistan’s Power Division, told Reuters in an interview last Friday.

He said discussions were under way between power producers and the government because “there is a clear understanding on both sides that the status quo can’t be maintained.”

Leghari stressed that all stakeholders would have to “give in to a certain point” - though without compromising completely on business sustainability - and this would have to be done “as soon as possible”.

Faced with chronic power shortages a decade ago, Pakistan approved dozens of private projects by independent power producers, financed mostly by foreign lenders.

The incentivised deals for electricity included high guaranteed returns and commitments to even pay for unused power.

However, a sustained economic crisis has slashed power consumption, leaving the country with excess capacity that it needs to pay for.

 - Reuters