Sovereign guarantees limit renegotiation of private power plant contracts: power minister

The government is negotiating to scrap late payment fees on private power plant contracts

Power Minister Iqbal Hassan Mahmood has said the government's ability to renegotiate costs, including capacity charges, under contracts signed with private power plants by the previous administration is limited because those agreements carry sovereign guarantees.

However, he told parliament on Wednesday that the government is negotiating with power producers to eliminate late payment fees on overdue bills.

The minister made the remarks while responding to a supplementary question from Jamaat lawmaker Mardia Mumtaz during the parliamentary session.

Mardia asked whether the government had a concrete plan to reduce capacity charges, which account for a significant share of electricity subsidies and overall power sector costs despite recent tariff increases.

In reply, Iqbal said the previous government had provided sovereign guarantees in contracts with private power companies.

"A sovereign guarantee is a guarantee by the state. Cancelling such guarantees requires a legal process that takes considerable time," he said.

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