Pakistan’s government plans to abandon the single-buyer model in the electricity sector and transition entirely to a competitive bidding system, Energy Minister Muhammad Owais Leghari announced Friday during a briefing at the National Electric Power Regulatory Authority (NEPRA).
Leghari said a proposal has been prepared to recommend that power purchases be made on a competitive basis, with the Central Power Purchasing Agency (CPPA) no longer serving as the sole buyer.
Pakistan follows a single-buyer model for electricity, where the Central Power Purchasing Agency (CPPA) serves as the sole purchaser, acquiring power at rates set by the National Electric Power Regulatory Authority (NEPRA).
"We are leaving the single-buyer model. It is an important step for keeping prices low,” he said. The proposal will be presented to the prime minister within two weeks.
"It is crucial that we don’t buy expensive power. We don’t want the blame for continuing to purchase costly electricity. According to the law, we must buy the lowest-cost power,” Leghari added.
The minister also addressed the recent reduction in electricity rates announced by Prime Minister Shahbaz Sharif. The new rates, which lower domestic consumer tariffs by PKR 7.41 to PKR 34.37 per kWh and industrial tariffs by PKR 7.59 to PKR 40.6 per kWh, will apply to April consumption and be billed in May.
"We aim to ensure a sustainable, low-cost energy supply, and the development of this sector is essential,” Leghari said.
Circular debt has reached PKR 2,400 billion, with generation company losses amounting to PKR 640 billion, excluding subsidies.
Leghari highlighted efforts to reduce circular debt, noting that PKR 9 billion was saved between July and December through measures to curb theft, while PKR 145 billion was saved against budgeted losses. He expressed optimism that circular debt, along with interest, could be paid off within six years if the government secures a six-year term sheet from banks.
The minister acknowledged challenges, including high generation costs due to macroeconomic instability, capacity payments impacted by reduced grid demand, and regulatory gaps under the NEPRA Act.
Leghari said negotiations are ongoing with remaining independent power producers (IPPs), including those under the China-Pakistan Economic Corridor (CPEC) framework, to establish mutually agreed arrangements that lower costs for consumers. Talks are also underway to reprofile debt with China for CPEC energy projects.
Electricity could be even cheaper if transmission constraints were addressed, Leghari noted. "Energy cannot be efficiently evacuated from cheaper plants in the South. We are planning to arrange funding to restructure the transmission system through public-private partnerships.” He added that the National Transmission Company (NTC) has been split into two entities, with a new company formed.
A detailed study is being conducted to assess the conversion of imported fuel plants to coal. Additionally, total automation of electricity meters is expected to be finalized through a services-based contract in June.
Privatization efforts are in full swing for IESCO, FESCO, and GEPCO, with conditions precedent for acquisitions already completed. LESCO, MEPCO, and HESCO are slated for privatization in the next phase.
