Pakistan’s Federal Minister for Energy Awais Ahmed Khan Leghari has said the government will privatize Guddu and Nandipur power plants. In addition, in the first phase, three power distribution companies — Islamabad Electric Supply Company (IESCO), Gujranwala Electric Power Company (GEPCO), and Faisalabad Electric Supply Company (FESCO) — will also be privatized.
Briefing the media, the energy minister addressed the recent reduction in electricity rates announced by Prime Minister Shehbaz Sharif, where a PKR 7.41 per unit cut was announced as general average cut, with PKR 7.69 per unit reduction for industries inclusive of taxes.
Leghari said electricity bills for consumers using up to 200 units per month will be cut in half under new measures aimed at easing the burden on the poor.
He said that the government will also privatize Lahore Electric Supply Company (LESCO), Sukkur Electric Power Company (SEPCO), and Multan Electric Power Company (MEPCO) in the second phase.
He highlighted a series of structural issues plaguing the country’s energy system. The biggest challenge is the high cost of electricity generation, which has led to increased consumer tariffs and mounting circular debt. Non-competitive additions to the power sector have worsened the situation, he said, adding that electricity theft remains a major issue nationwide.
The energy minister also pointed to weak institutional coordination and regulatory gaps, which he said are contributing to the deepening crisis in the power sector. Exchange rate fluctuation is another challenge burdening the consumers.
He also said that the International Monetary Fund (IMF) has been taken into confidence regarding improvements in the power sector and electricity prices are expected to see a significant reduction in the next two to three years.
‘IPP negotiations expected to save PKR 3.7 trillion’
Leghari pointed out that the power sector’s circular debt has reached PKR 2.4 trillion. He noted that negotiations with 36 independent power producers (IPPs) have concluded, which are expected to save PKR 3.696 trillion over the lifetime (three to 25 years) of these power plants.
He emphasized that power sector reforms will improve efficiency. “High generation costs and poor performance of distribution companies are major challenges,” he said, adding that expensive power plants were installed in the past, contributing to the crisis.
He said future power projects will be awarded through competitive and cost-effective bidding.
He also acknowledged transmission issues in the electricity network, noting that resolving them could reduce electricity prices by another PKR 2 per unit.
He also said that the government is also in discussion with the ADB and World Bank to finance the transmission projects over next two to three years.
The Indicative Generation Capacity Expansion Plan (IGCEP) is now nearing its final stage and will be presented to the prime minister within one to two weeks, Leghari said. It also remains a major challenge for the power sector. “We will not purchase expensive electricity in the future,” Leghari stated, adding that power procurement will be strictly based on least-cost principles.
“Electricity will only be bought on a competitive basis,” he said. He noted that the least-cost principle has now been made a formal part of Pakistan’s power policy.
Leghari also proposed that the Central Power Purchasing Agency (CPPA) should not remain the sole buyer of electricity, suggesting greater participation from the private sector.
The energy minister added that imported coal power plants will be converted to local coal, which will reduce the fuel import bill and bring down electricity prices.
The minister further said that it is too early to predict whether the base electricity tariff will increase or decrease in the near future. “We will have to wait and see the situation until June to determine any changes in the base tariff,” Leghari said, adding that all decisions are implemented through the regulator, while the government performs the groundwork.
He noted that the recent relief of PKR 7.41 per unit would likely reflect in the base tariff structure as well. However, he emphasized, “At this stage, no forecasts can be made regarding changes in the base tariff.”
