Pakistan and Iran have agreed to extend their electricity sales agreement, under which the new price has been set between 7.7 and 11.45 cents per kilowatt-hour.
This development came after successful negotiations between the relevant authorities of both countries. The amended agreement is expected to be presented today (Tuesday) before the Economic Coordination Committee (ECC) for approval.
The previous power purchase agreement between Pakistan and Iran expired on 31 December 2024. The Prime Minister’s Office had also sought an update on the renewal of the agreement.
Currently, Pakistan imports 100 MW of electricity from Iran, which is used to meet the needs of the border districts of Balochistan. Historically, payments have been made through informal channels or barter trade. The imported electricity amounts to about 18 million units annually, with the current cost exceeding Rs 27 per unit, which is significantly higher than electricity generated from imported coal and RLNG.
According to sources, a delegation from the Iranian company Tavanir visited Islamabad on 25 December 2024, after which negotiations on the draft agreement were held at the CPPA-G office on 26 and 27 December.
Both sides agreed on a minimum “take or pay” obligation under which the buyer will pay Rs 30 million across all interconnection lines.
Several pricing formulas were considered, but ultimately the following formula was agreed upon:
R = 3.2 + 0.075 × P
Here, R represents the electricity price (US cents/kWh), 3.2 is the fixed cost of electricity supply, and P is the average monthly crude oil price in the OPEC basket (between $60 and $110 per barrel). Under this formula, the price will remain within the set range of 7.7 to 11.45 cents/kWh.
The principles for line loss allocation for the Polan, Jeewani, and Pishin Mand interconnection lines, previously agreed in 2023 and 2024, have also been incorporated into Amendment No. 10.
According to reports, before the amended terms are formally signed, both parties will brief their respective authorities.
