ISLAMABAD: The federal government has announced a significant progress in reforming Pakistan’s power sector, with sharp focus on reducing electricity prices, incentivizing industrial growth and addressing long-standing structural issues.
In 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 have been initiated with Chinese Independent Power Producers (IPPs) to renegotiate existing agreements.
“We have already initiated talks with Chinese IPPs,” said Leghari, adding that this effort alone has resulted in a reduction of Rs1.25 per unit in electricity rates. “All benefits from the renewal of contracts with IPPs will be passed on to consumers,” he said.
Electricity prices, a perennial concern, have shown signs of easing. Average tariffs have dropped from Rs48.70 per unit in June to Rs44.04, while industrial tariffs have plunged from Rs58.50 to Rs47.17 — a Rs4.66 and Rs11.33 reduction, respectively. This reprieve has been made possible by eliminating a Rs150 billion cross-subsidy for industries, which the minister claims has sparked job creation and economic stability. Leghari further said that the government has made substantial strides in reforming the country’s power distribution companies (Discos), with independent boards now driving improvements. These boards were constituted without external influence, and they are now delivering results.
In the first five months of the current fiscal year, the DISCOs have reported significantly reduced losses compared to the same period last year. The minister expressed optimism about cutting losses by half this fiscal year and eliminating them entirely by the next.
The government has also begun restructuring power sector loans, a critical step to address the financial burden caused by capacity payments, which account for 75 per cent of electricity bills. If successful, the restructuring could lower electricity bills by several rupees per unit for consumers. “This is a major milestone. No one had considered debt restructuring in the past, but if we succeed, it will provide a significant relief to consumers,” the minister said.
In a major overhaul of the country’s transmission network, the National Transmission and Dispatch Company (NTDC) has been divided into three entities: the National Grid Company of Pakistan, which focuses on reliable electricity transmission; the Energy Infrastructure Development and Management Company, which oversees development projects and public-private partnerships; and the Independent System and Market Operator (ISMO), responsible for establishing a competitive electricity market.
Key transmission projects include a 500 kV double-circuit line from Ghazi Barotha to Faisalabad West and a similar line 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 to regulate frequency.
The government has also pushed forward privatization plans for power distribution companies by appointing independent boards of directors and moving toward concession models. At the same time, market liberalization is underway, with the newly established Independent System and Market Operator allowing consumers to purchase electricity from multiple suppliers, moving away from the current government-controlled system where it acts as the sole buyer of power. It will promote market competitiveness.
The renegotiation of agreements with Independent Power Producers (IPPs) has yielded national savings of Rs411 billion, with annual savings projected at Rs70 billion. Additional settlements with bagasse-based and other IPPs are expected to generate further savings of over Rs700 billion.
Settlements with eight bagasse-based IPPs will save Rs238.224 billion overall, with an annual reduction of Rs8.826 billion. Renegotiations with 16 other IPPs are projected to save Rs481 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 Rs26 per unit, commercial entities Rs22.71 and industries Rs15.05/unit.
Additionally, the federal and Balochistan governments are investing Rs55 billion 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 generation companies, with their dead assets being sold through open auctions under media’s live coverage.
However, he said that despite reforms, challenges such as transmission constraints, poor recovery rates from power distribution companies (causing Rs250 billion in losses) and a Rs2.2 trillion circular debt burden persist. Depreciation of the rupee further complicates debt repayments. The government has responded by restructuring circular debt, shifting costs from electricity bills to national debt to ease the financial burden on consumers.
The minister further said, “Regarding your upcoming power projects, just as the IPPs previously caused you losses, we were about to purchase 17,000 MW of electricity. We have stopped this process. We looked into which upcoming plant would either decrease or increase your price. We conducted a detailed review of this. This is called the IGCEP (Integrated Generation Capacity Expansion Plan).” He added, “Without this formula and legal framework, each unit of electricity purchased would have continued to add to 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.” The prime minister will approve this soon, he said.
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