Pakistan Plans to Establish Electricity Exchange, Power Sector Reforms Underway

The federal government of Pakistan is working on establishing an electricity exchange, modeled after India’s power market, as part of ongoing reforms in the country’s power sector.

In a recent meeting, the Prime Minister directed the Power Division to propose solutions for implementing net metering and a strategy to reduce losses in distribution companies (DISCOs) through technological advancements. The government is also reviewing tariff reductions, and plans to distinguish between internal measures that can be implemented independently and those requiring external consultations. Additionally, the Power Division has been asked to submit a recovery plan for loss-making DISCOs, especially in provinces like Khyber Pakhtunkhwa, Balochistan, and Sindh, where high losses and electricity theft remain significant challenges. The chairman of the Task Force is also set to finalize the framework for the Competitive Trading Bilateral Contract Market (CTBCM), which aims to improve competition and efficiency within the power sector. The privatization of DISCOs remains a point of contention, with provincial governments showing little interest in assuming ownership. The Sindh government has refused to take over Hyderabad Electric Supply Company (HESCO) and Sukkur Electric Power Company (SEPCO), citing financial instability. Similarly, Balochistan has declined to take over Quetta Electric Supply Company (QESCO), urging the federal government to proceed with its privatization plans. In Punjab, while the provincial government had initially approved hiring a Transaction Advisor for DISCO acquisition, the process was halted when the federal government shifted focus to privatization. Three DISCOs in Punjab—IESCO, FESCO, and GEPCO—are now in advanced stages of privatization, while discussions continue regarding a long-term concession model for three other DISCOs. Meanwhile, Khyber Pakhtunkhwa is still evaluating the federal government’s proposal. Brig (Retd) Tariq Saduzai, Special Assistant to the KPK Chief Minister, confirmed that the province is considering taking over DISCOs and has held preliminary discussions with the federal government. However, he stressed the need for proper due diligence, expert consultation, and the appointment of Transaction and Financial Advisors before making any final decisions.