ISLAMABAD: The federal government has announced significant progress in reforming Pakistan’s power sector with a sharp focus on reducing electricity prices, spurring industrial growth and addressing long-standing structural challenges.
At a press conference on Saturday, Minister for Power Sardar Awais Ahmed Khan Leghari highlighted the government’s efforts to stabilize the economy and ensure energy sustainability. He announced that talks had begun with China’s independent power producers (IPPs) to renegotiate existing agreements.
“We have already started talks with Chinese IPPs,” Leghari said, adding that this effort alone has led to a reduction in electricity rates by Rs 1.25 per unit. “All benefits from the renewal of IPP contracts will be passed on to consumers,” he said.
Electricity prices, a persistent problem, are showing signs of easing. Average tariffs fell from Rs 48.70 per unit in June to Rs 44.04, while industrial tariffs fell to Rs 47.17 from Rs 58.50 – a reduction of Rs 4.66 and Rs 11.33 respectively. The relief was made possible by the removal of a Rs 150 billion cross-subsidy for industries, which the minister said had spurred job creation and economic stability. Leghari further said that the government has made substantial strides in reforming the country’s Distribution Companies (Discos), with independent boards now managing the improvement. These councils were established without outside influence and are now delivering results.
In the first five months of the current fiscal year, DISCO companies reported significantly lower losses compared to the same period last year. The minister expressed optimism about halving the losses this fiscal year and eliminating them completely by next year.
The government has also launched credit restructuring for the power sector, a major step to address the financial burden caused by capacity payments, which account for 75 percent of electricity bills. If successful, the restructuring could reduce consumers’ electricity bills by a few rupees per unit. “This is a significant milestone. No one thought about debt restructuring in the past, but if we succeed, it will bring significant relief to consumers,” said the minister.
As part of a major overhaul of the country’s transmission network, the National Transmission and Dispatch Company (NTDC) has been split into three entities: the National Grid Company of Pakistan, which focuses on reliable electricity transmission; Energy Infrastructure Development and Management Company, which oversees development projects and public-private partnerships; and the Independent System and Market Operator (ISMO), responsible for creating a competitive electricity market.
Key transmission projects include a double-circuit 500 kV line from Ghazi Barotha to Faisalabad West and similar lines connecting Matiari, Moro and Rahim Yar Khan. Innovative solutions such as a 1,000 MWh battery energy storage system in southern Pakistan are also being implemented for frequency regulation.
The government has also pushed through privatization plans for power distribution companies by appointing independent boards and moving to concession models. At the same time, market liberalization is taking place, with a newly established independent system and market operator allowing consumers to purchase electricity from multiple suppliers, thereby moving away from the current government-run system where it acts as the sole purchaser of electricity. It will support market competitiveness.
The renegotiation of Independent Power Producers (IPP) agreements has yielded national savings of Rs 411 billion, with annual savings estimated at Rs 70 billion. Additional settlements with bagasse and other IPPs are expected to generate additional savings of over Rs 700 billion.
The settlement with the eight bagasse-based IPPs will save a total of Rs 238.224 billion with an annual reduction of Rs 8.826 billion. Renegotiation with 16 other IPPs is expected to save Rs 481 billion. The government has introduced a special tariff called the Bijli Sahulat Package to reduce energy costs for consumers. Under this scheme, households will save up to Rs 26 per unit, commercial entities Rs 22.71 and industries Rs 15.05/unit.
In addition, the federal and Balochistan governments will invest 55 billion rupees to solarize 27,000 agricultural tube wells, with the federal government covering 70 percent of the cost and the provincial government contributing 30 percent.
Efforts are underway to decommission redundant manufacturing companies, with their dead assets being sold through open auctions under live media coverage.
But he said that despite reforms, problems such as transmission constraints, poor rates of return from power distribution companies (causing losses of Rs 250 billion) and a cyclical debt burden of Rs 2.2 trillion persisted. Depreciation of the rupee further complicates debt repayment. The government responded by restructuring the current debt, shifting costs from electricity bills to national debt to reduce the financial burden on consumers.
The minister further said, “As for your upcoming power projects, just as the IPPs caused you losses earlier, we were going to buy 17,000 MW of electricity. We have stopped this process. We researched which upcoming plant would lower or increase your price. We have done this in detail. This is called IGCEP (Integrated Generation Capacity Expansion Plan). He added: “Without this formula and legal framework, every unit of electricity purchased would continue to increase your bills. If we had followed the old formula, the people of Pakistan would have paid an additional 5.5 trillion rupees over the next 10 years. According to him, the Prime Minister will approve it soon.
