Reforming the power sector in Pakistan

By January 2025, an average reduction of 3pc is expected in electricity tariffs as compared to June 2024


The power sector of Pakistan is dealing with intricate and grave problems, such as bad governance, delayed decisions, and stagnant economic growth. These difficulties have resulted in inefficiencies which are affecting household incomes, while making both local, and export-oriented businesses uncompetitive. Such inefficiencies are now reflected in the price of electricity, and the convoluted nature of the power sector in Pakistan.

Due to high demand between June and August every year, an increase in electricity prices leads to much political noise, and volatility. To address the same, the government has initiated policies to reduce the costs by using domestic fuels instead of foreign fuels, thereby resulting in reduction in costs associated with generation of electricity. The expected tariff adjustments for this fiscal year 2024-2025 which took place in June will help determine the tariff revisions in the next year. The new tariff adjustments for 16.8 million protected consumers (domestic) reflect an increase of less than 2%. For non-protected consumers, the increase is of an average of 9%. Additionally, lower electricity rates are anticipated as the economy strengthens, and capacity costs are spread over a bigger consumption base to reduce tariffs across the board. By January 2025, an average reduction of 3% is expected in electricity tariffs as compared to June 2024.

The government of Pakistan has also reduced the industrial tariffs to promote increase in production through industrial units, and create employment opportunities. This support is essential to boost the economy. The Ministry of Power is working in collaboration with the World Bank to privatize the distribution companies (DISCOs) for the improvement of operational efficiencies and to reduce electricity thefts and circular debts. This privatization will help attract capital and enhance the power sector’s performance. Infrastructure investments are being made by the government to overcome inefficiencies in the transmission and distribution of electricity. Priority will be given to establishing the infrastructure to mitigate the limitations of North-South transmissions, as cheaper power produced in the South cannot be used elsewhere due to such constraints. To lower the agricultural losses, and reduce the carbon footprint, a decentralized tubewell solarization program is also being implemented.

Reducing carbon emissions and implementing a competitive pricing system are the priorities of the government. The solar strategy aims to incentivize the widespread adoption of solar energy without compromising the grid stability. Increase in production, elimination of inefficiencies, and promotion of industrial growth are the main components of power sector reforms.

More than half of Pakistan’s electricity is produced by lowcarbon sources like nuclear, renewable energy, and hydel. The cost of production using these sources is more affordable as compared to imported fuels. For instance, the fuel cost of electricity generation is Rs10.9 per kWh, but because of hydel power, it drops to Rs9 per kWh in summer. The government aims to provide and develop a sustainable energy industry that fosters economic expansion and stability. The implementation of these market- oriented reforms, and infrastructural improvements to the power industry will not only reduce the inefficiencies but will serve as a driving force for Pakistan’s industrial progress.

— Amina Jadoon is a freelance writer.

— Amina Jadoon is a freelance writer.

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