Deal to retire power circular debt, slash tariffs on the anvil

ISLAMABAD: The government is on the verge of finalising a major financing arrangement with commercial banks to retire the ballooning circular debt in the power sector, Federal Energy Minister Owais Leghari said on Wednesday.

Unveiling a broad set of energy sector reforms aimed at lowering electricity tariffs, enhancing system efficiency, and fast-tracking the transition to clean energy, the minister told reporters the debt retirement plan “is almost at the conclusion; it’s about to happen and could happen any day now.”

Government has introduced major power sector reforms over the past year, resulting in lower tariffs and a shift towards renewable energy. Industrial tariffs have been cut by 30 percent over the last one year. The government aims to ease consumer burdens and lower tariffs sustainably. Around 18 million household consumers have seen a 50 percent drop in prices.

“We are reviewing agreements with Independent Power Producers and have already seen a decline in electricity prices,” he added. He also criticised past energy policies, saying they were not based on realistic assumptions. “During the COVID-19 pandemic, electricity demand increased, but poor planning in earlier years continues to affect us today.”

Integrating the Bhasha Dam into the national grid will be a major step forward, alongside ongoing reforms in the transmission system, he said adding, “We are trying to ensure consumers don’t suffer due to poor planning.”

Later, speaking with journalists, Leghari said the federal government is preparing a review petition to submit to the National Electric Power Regulatory Authority over K-Electric’s tariffs.

“Our goal is to shield both the federal government and consumers from undue financial pressure,” he said. “We are moving towards privatisation. Instead of relying on handouts, these companies should focus on efficiency and enforce regulatory rules in our Discos,” Leghari said.

He added that regulatory laws must be enforced across all distribution companies and expressed the hope that Nepra would make decisions beneficial to both the country and its consumers.

Leghari said the government has revised the net metering policy after consulting stakeholders. “Once approved, the new net metering framework will be implemented within a month,” he stated.

He acknowledged challenges due to climate change, which has reduced the country’s hydropower generation capacity. “Because of this shortfall, we have had to rely on more expensive power generation sources,” he said.