Initiate major reforms in electricity sector, proposal to involve private sector in generation and distribution – Pakistan

ISLAMABAD: The Power Division has reportedly started work on removing 23 faults identified in power generation, transmission and distribution in the country.

The proposed reforms have also been shared with the Prime Minister and the Special Investment Facilitation Council (SIFC), Business Record reports.

Sources said that the Power Division has identified four factors related to the power generation process which include substitution of imported fuel, optimum utilization of fuel and capacity, reduction of capacity payment burden and privatization.

Against this backdrop, the main issue that has concerned the authorities is the power sector’s unmanageable revolving debt of over Rs 2.4 trillion, which the government says is an unpayable liability, which cannot be recovered.

Electricity companies have prepared to collect additional tax from the public on their income

Secretary Power Rashid Mahmood Langriyal said that circular debt is unpaid dues, of which only 100 billion rupees are circular, the rest are dues. No money will be charged. If it was circular, some amount could have been refunded.

During the fiscal year 2023-24, the revolving credit has been increased by about Rs 100 billion despite the fact that the government had promised the IMF and the World Bank that the revolving credit would be Rs 2.310 trillion.

Sources said the problems identified in the distribution system are high losses, inefficiencies and high tariff and tax reforms. The Power Division is expected to share its review of the plan with the Senate Standing Committee on Power on August 6, 2024. The import fuel substitution strategy includes adding 2,400 MW of solar generation, replacing imported coal power plants and using auxiliary electricity for mining.

Electricity is going to be cheaper in the coming days, the big claim of the Minister of Petroleum

For tariff reforms and tax reforms, the Power Division is working on reduction of industrial cross-subsidies, provision of subsidies to protected domestic consumers through social security programmes, tariff restructuring and tax restructuring.

Power Minister Owais Laghari had requested Senate Standing Committee Chairman Mohsin Aziz to allow the Power Division to make a presentation on the fault lines of the power sector and measures being considered for improvement.

The minister argued that the government is not in favor of buying and selling power itself and wants to enable a competitive commercial bilateral contract market. Nepra is also ready for a public hearing on it.