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Federal Minister for Power, Sardar Awais Ahmed Khan Leghari, on Monday participated in a detailed session with Power Sector International Development Partners to discuss Power Sector Reforms and the way forward. The development partners were led by Najy Benhassine, Country Director for the World Bank, and included representatives from the IMF, ADB, IFC, KFW, the German Embassy, FCOD, UNDP, and AIIB.
During the session, the Federal Minister briefed the participants about the reforms undertaken by the Power Division to enhance efficiency and discipline within the sector. These reforms aim to make electricity prices more competitive and affordable for all consumers, particularly the industrial sector.
The Minister also highlighted the importance of efforts to rationalize electricity tariffs for the overall economic benefit of the country and assured the participants that all negotiations with Independent Power Producers (IPPs) were being conducted in a free, fair, and transparent manner. He further stated that IPPs had the right to walk away from negotiations, resort to arbitration, or opt for a forensic audit as per the terms of their agreements.
The Minister emphasized that the government is committed to engaging all development partners and has adopted an inclusive approach to policy formulation and execution. He also mentioned that, due to the government’s focus on transparency, it had successfully reduced around 7,000 MW from the Integrated Generation Capacity Expansion Plan (IGCEP), which had initially committed to 17,000 MW, resulting in significant cost savings on expensive power.
Awais Leghari shared details about various reforms undertaken by the Power Division, including the transition from “Take or Pay” to “Take and Pay” contracts, the elimination of furnace oil-based power plants, and the conversion of imported coal plants to use local coal.
Awais Leghari also stated that extensive studies on power generation have revealed that the country had not followed a least-cost policy in the past, but moving forward, the focus would be on implementing the least-cost approach.
The Minister also provided an update on efforts to remove transmission constraints, such as the construction of the Matriari-Moro-RYK lines, the Ghazi Barotha-FSD lines, the installation of Reactive Power Compensation Devices, and the development of a Battery Storage System. He further informed the participants about the process of splitting the National Transmission and Dispatch Company (NTDC) into two entities: the Energy Infrastructure and Development Company and the National Grid Company.
He also highlighted the government’s initiative to provide electricity to Special Economic Zones (SEZs) by developing a regulatory and contractual framework and signing Service Level Agreements (SLAs) with industries that have Captive Generation. In addition, the government is implementing an Asset Protection Management System (APMS) and Advanced Metering Infrastructure (AMI) on 100% of feeders.
Regarding the elimination of circular debt, the Minister stated that the government plans to achieve this within the next five to eight years. He also discussed the elimination of electricity duties and the rationalization of subsidies, which are key steps toward the rationalization of electricity tariffs. Rationalizing net metering is another area of focus, as it is currently adding a financial burden of 150 billion rupees on the rest of the consumers.
The Minister explained that the government is exploring ways to induce incremental demand through marginal pricing, emphasizing the need for long-term planning since surplus power is currently underutilized, resulting in added capacity charges. He also addressed the establishment of a wholesale electricity market and confirmed that the government will no longer purchase additional power.
In addition, Awais Leghari touched upon the privatization of Distribution Companies (DISCOs), improving governance at DISCOs’ boards, and implementing reforms at the Power Planning and Management Company.
The participants appreciated the reforms initiated by the Power Division and assured their continued support in the ongoing process.
