Power Minister Awais recalls struggle to reform power sector amid chronic issues
ISLAMABAD: As the end of the calendar year approaches, Power Minister Sardar Awais Ahmed Khan Leghari highlighted the government’s key achievements and ongoing initiatives in the power sector.
In a news conference on Saturday, the minister announced that the government is pursuing privatisation and concession models for electricity distribution, starting with appointing independent directors on the boards of distribution companies.
Mr Leghari added that the circular debt costs are being shifted from electricity bills to the national debt to reduce the consumer burden.
He added that through innovative policies, substantial investments, and bold reforms, significant progress has been made towards ensuring energy sustainability, reducing electricity costs, and driving economic growth.
Claims reducing tariffs with new IPP deals
Regarding Independent Power Producers (IPPs), the minister revealed that the agreements with five IPPs have been terminated in the first phase, achieving national savings of Rs411 billion and annual savings of Rs70bn.
“In the second phase, agreements with eight bagasse-based IPPs have been settled, resulting in annual savings of Rs8.826bn and national savings of Rs238.22bn, while negotiation with 16 other IPPs was underway, which will result in savings of Rs481bn.
“The power sector has witnessed tariff reductions as the average price of electricity has decreased to Rs44.04 per unit from Rs48.70 per unit in June 2024, marking a reduction of Rs4.66,” he stated.
He added that the industrial tariff had also significantly dropped to Rs47.17 per unit from Rs58.50 in June 2024, reflecting a reduction of Rs11.33.
The minister presented a detailed overview of reforms undertaken in the last nine months.
“We have eliminated Rs150bn in cross-subsidies from the industrial sector, a step that has boosted industrial growth and job creation in Pakistan,” he highlighted.
Mr Leghari emphasised that the government was diligently working on upgrading the transmission sector, including the bifurcation of the National Transmission and Despatch Company into three entities.
These three entities will be the ‘National Grid Company of Pakistan’ being established for efficient and reliable transmission, the ’Energy Infrastructure Development and Management Company for project management, and the ’Independent System and Market Operator for a competitive and transparent electricity market.
He highlighted the solarisation of agricultural tube wells in Balochistan.
“We are solarising 27,000 tube wells at Rs55bn, with a 70pc federal government contribution.”
The minister boasted that this initiative would promote green energy and revolutionise the agricultural sector in Balochistan.
Challenges and incentives
He acknowledged the challenges faced by the power sector, including transmission constraints and poor recovery rates, which contribute to Rs250bn in losses caused by Discos’ inefficiencies.
“Efforts to manage the Rs2.2tr circular debt burden were ongoing, focusing on reducing consumer electricity costs. We are also addressing the impact of dollar-denominated debt as the depreciation of the rupee has exacerbated it,” he said.
The minister elaborated on the Bijli Sahulat Package, saying that this package introduces a special tariff of Rs26.07 per unit for households and industries.
Under this package, domestic consumers will benefit from savings between Rs11.42 and Rs26.00 per unit, while commercial consumers can expect savings of Rs13.46 to Rs22.71 per unit.
“The industrial users will enjoy savings ranging from Rs5.72 to Rs15.05 per unit, and this initiative underscores our commitment to reducing electricity costs and supporting economic growth,” Mr Leghrai added.
Tariffs for EVs
However, he did not elaborate further on the package. He made a futuristic announcement about the government’s plan to introduce special tariffs for electric vehicles (EVs) under a forthcoming EV policy.
“This policy will reduce dependency on imported fuels, lower greenhouse gas emissions, and improve air quality,” the minister said, adding that it will also foster economic growth through job creation in local manufacturing and the development of charging infrastructure.
He claimed that the new EV policy would revolutionise Pakistan’s transport sector. The minister asserted that the reforms and achievements will address long-standing challenges in the power sector, and with increased economic activity, enhanced employment rates, and lower electricity costs on the horizon, the future of Pakistan looks promising.
Published in Dawn, December 29th, 2024