The Sustainable Development Policy Institute (SDPI) recently hosted a discussion titled, ‘Post budget dialogue on electricity pricing: Impact of fiscal priorities and tariff reforms’. The session brought together key energy experts and thought leaders to critically assess the pressing issues faced by Pakistan’s power sector, with a particular focus on the complexities of the electricity tariff structure, calling for urgent simplification and stakeholder engagement.
The session was moderated by Ubaid ur Rehman Zia – Senior Research Associate at SDPI with energy experts including, Tahir Basharat Cheema – President of the Institute of Electrical and Electronics Engineers Pakistan (IEEEP), Rehan Javed – Energy analyst and industrialist, Dr. Khalid Waleed – Senior Energy Associate and Ahad Nazir – Programme Manager from SDPI, Dr. Adeel Waqas – Principal of U.S. Pakistan Centre For Advanced Studies in Energy (USPCAS-E), and Sheikh Muhammad Iqbal – former CEO Pakistan Textile Council, now an independent consultant.
Rehan Javed highlighted the need for the government to shift its current approach to encourage privatisation within the power sector and actualise the competitive future it envisions. He, in particular, appreciated KE for the technical and service level improvements it brought about in its territory after privatisation and how it served as a template for other DISCOs to replicate. He urged institutions to support such strides to incentivise private investment in the sector, rather than presenting barriers time and again that hinder achieving the end goal.
At the national level, he proposed introducing tariffs that better align with the industrial sector’s needs, enabling industries to plan their operations more effectively while ensuring an equitable distribution of electricity costs. Javed also emphasised the challenges posed by net metering and the glaring lack of regulations surrounding power theft, stressing that effective policing is crucial to addressing this persistent issue.
Tahir Basharat Cheema voiced concerns about the outdated and inefficient tariff structure, noting that it has remained largely unchanged since the 1960s, when it was originally designed to suppress load, an objective that is no longer relevant today. He argued that the system needs a total overhaul to cater to the country’s evolving energy needs, where the concept of wholesale rates should be applied for excess consumption. He stated that the tariff falls beyond the scope of either DISCOs, GENCOs, or IPPs, with the government being responsible for its updates. Cheema also highlighted the necessity for increased investments in DISCOs, which are currently suffering due to inadequate funding and poor operational efficiency in certain regions.
He also advocated for reducing taxes on electricity bills and mentioned that the power system appears to be used to sustain the FBR for revenue collection. He applauded the removal of TV license fees from electricity bills and the making of some DISCO boards independent, terming these two steps the silver lining. Cheema also expressed concern about the death threats being received by DISCO representatives because of the prevailing issue of power theft. He argued that privatisation alone would not suffice and called for a more comprehensive approach to the sector’s challenges.
Ahad Nazir, Programme Manager at SDPI, pointed out the inefficiency in the use of energy, particularly for non-productive purposes. He also discussed the country’s dependency on global fossil fuels. He highlighted the structural issues in Pakistan’s energy sector, including circular debt and the retirement of power plants, which remain inadequately utilised.
Dr. Khalid Waleed emphasised the importance of incentivising productive electricity demand in Pakistan. He discussed the need to rationalise the subsidy system, particularly the cross-subsidisation by consumers, where 54% of the population enjoys protected electricity tariffs. Dr. Waleed also stressed the importance of creating a competitive energy market and reforming the power purchase agreements.
Dr. Adeel Waqas drew attention to the potential of technology to transform the energy sector. He emphasised the role of smart meters and digitalisation in reducing human intervention and corruption while also improving operational efficiency. Waqas urged the government to trust academic institutions and entrust local engineering professionals in shaping the future of Pakistan’s power sector.
Sheikh Muhammad Iqbal spoke about the potential change in consumption patterns should the net metering policy be revised and advocated against the cross-subsidisation between electricity consumers.
The panellists collectively discussed the challenges faced by Pakistan’s energy sector, including the rising cost of generation, high-capacity component, the need for tariff reforms, and the impact of fiscal policies on energy pricing. They also identified critical gaps in the sector’s governance, stressing the importance of transparency, stakeholder involvement, and a more comprehensive approach to privatisation.
The session concluded with a call for urgent and comprehensive reforms to ensure a sustainable and equitable energy future for Pakistan. The discussion emphasised the need for a balanced approach, combining market-driven policies with government oversight and support.
