- Energy sector reforms face economic hurdles: Awais Leghari.
- The country is still grappling with the consequences of past IPP contracts, he adds.
- He deplores the financial burden weighing on the system due to net billing system.
ISLAMABAD: Energy Minister Awais Ahmad Khan Leghari said that in order to resolve the long-standing energy problems of the power sector, the government would introduce transformative reforms to tackle inefficiency, production of expensive electricity and poor planning, News reported Thursday.
Leghari, speaking at a seminar organized by the British High Commission, outlined bold measures including the introduction of the Independent System Market Operator (ISMO) and its operationalization in March 2025 and the privatization of distribution companies (discotheques), aiming to reshape the sector towards a competitive and transparent market.
“Reforms in the energy sector face significant obstacles due to the current economic situation,” the minister said while acknowledging the challenges posed by economic pressures on the energy sector.
Criticizing the historical lack of strategic planning in the power sector, which has led the country to depend on expensive power generation, he said: “Pakistan has never invested in power generation on the basis of a lowest cost methodology. Instead, we have systematically purchased expensive energy with opaque pricing models, and we still face the fallout from old IPP contracts. »
Leghari highlighted the upcoming addition of 17,000 megawatts to Pakistan’s energy portfolio, but only 87 MW meets the required lowest cost criteria.
“Every second MW addition constitutes a violation of the least cost methodology,” he said, adding that the government is currently revising the Indicative Production Capacity Expansion Plan (IGCEP), with the aim of ‘approve a new ten-year plan within one year. month.
The energy minister also expressed concerns over the country’s net metering system which, although adding 1.2 gigawatts to the grid, has placed an excessive financial burden on the system.
“Only 100,000 wealthy people benefit from net metering, but the entire population bears the cost. The system needs to be streamlined, because the country simply cannot afford the current model,” he said. he declared.
Addressing the inefficiencies of the National Transmission and Dispatch Company (NTDC), the minister described it as “one of the most inefficient companies Pakistan has ever had”, pointing to years of delays in national transport projects .
He confirmed that plans were afoot to split NTDC into three companies to improve its efficiency.
Leghari also revealed that a major reform in the energy sector, the Independent System Market Operator (ISMO), through the restructuring of NTDC, has been approved and is expected to become operational in March 2025. This will open the path to bilateral contracts between electricity buyers. and sellers, with the government no longer being the only buyer of electricity.
“This entity will be responsible for creating a competitive, efficient, comprehensive and transparent electricity market for consumers,” he explained.
The privatization of distribution companies, or discotheques, is another key element of the reform program.
The minister, who heads 11 distribution companies with more than 200,000 employees, is confident that privatization will replicate the success experienced in the telecommunications sector.
“We created good professional boards of directors for nightclubs, for the first time in the history of the country, without any political, judicial, institutional or bureaucratic intervention. Hence the results we got from it. We have had a review with the IMF yesterday or the day before, and the objectives of our first quarter circular debt management plan, we did 170 billion rupees better than what was actually budgeted,” he noted .
Furthermore, the federal minister highlighted the major problems facing Pakistan’s economy, including population growth, health crises, water shortages and deficiencies in the education system.
“We need investment in water storage and distribution systems,” he stressed.
He highlighted the need for reforms to the social protection system to enhance transparency and inclusiveness, which would empower communities and improve governance.
“Local governments are the bedrock of democracy, but they lack constitutional protection in Pakistan,” he remarked.