Pakistan’s power sector is receiving renewed attention. Whether that attention marks a genuine turning point will depend on continued efforts.
Pakistan’s power sector is paying for decades of disconnected decisions: generation contracted without credible demand forecasts, transmission that failed to keep pace, fuel policies at odds with electricity economics, and distribution companies shielded from meaningful commercial discipline. The result is costly power, circular debt and an industrial sector struggling to compete. The central question is whether today’s reforms can finally align institutions, investment decisions and commercial incentives.
For years, the sector has needed sustained, detailed attention to its technical, financial and institutional problems—not episodic interventions or broad policy pronouncements. That focus is now more apparent in recent efforts to revisit established arrangements and scrutinise future investments. This shift is welcome, but its value will ultimately be judged by measurable improvements and lasting institutional reform.
The most promising initiative is integrated energy planning. Pakistan has long treated gas, electricity, petroleum, transmission and industrial energy demand as separate administrative compartments, even though every major decision in one affects the others. An integrated plan should compare fuels, technologies, networks and demand on a consistent least-cost basis. It should also prevent projects from being approved simply because an agency has prepared a persuasive presentation or a sponsor has secured political support.
Yet integrated planning cannot succeed within a fundamentally fragmented institutional structure. As I have argued previously when writing about the proliferation of energy-sector entities, governments too often respond to institutional failure by creating another company, authority, committee, or coordination mechanism. Mandates overlap, costs multiply and accountability evaporates. Creating another planning institution to reconcile agencies that should already share common assumptions is not integration; it is bureaucracy by multiplication.
This proliferation must stop. Existing entities should be reviewed for duplication, unnecessary layers removed, and authority matched with accountability. Most importantly, NEPRA and OGRA cannot continue to operate as isolated regulatory worlds while the government claims to pursue integrated energy planning. Electricity prices, gas allocation, LNG commitments, fuel switching and industrial demand are inseparable. At a minimum, the regulators need common forecasts, consistent economic assumptions, and formal joint scrutiny of cross-sector decisions. Over the longer term, the case for a unified, genuinely independent energy regulator deserves serious examination—provided specialist expertise and regulatory safeguards are preserved.
Integrated planning must not become an excuse to concentrate discretionary power. Its assumptions should be published, investment proposals independently tested, and any departure from least-cost recommendations explained. Success should be measured not by whether a plan is produced, but by whether it can stop an economically unsound project before the country is locked into paying for it.
The review of planned generation investments and the renegotiation of costly power arrangements are steps in the right direction. Unneeded megawatts are not progress; they are liabilities. But savings claimed from contract changes must be independently verified, and refinancing circular debt must not be mistaken for addressing the losses that created it.
The latest DISCO tariff petitions expose the danger. In its tariff petition for 2027, IESCO has reportedly sought an increase of roughly 54%, from Rs28.20 to Rs43.54 per unit. These are petitioned figures, not approved nationwide consumer rates; the final effect will depend on NEPRA’s determination and the applicable tariff arrangements. Even so, the proposal shows how unresolved distribution costs can overwhelm savings elsewhere in the sector. If increases of this magnitude were passed through to paying consumers, the consequences for industrial competitiveness, grid demand and household affordability could be severe. More consumers would seek alternatives, leaving fewer grid users to carry fixed costs and triggering another round of tariff pressure.
That is why the proposed privatisation of distribution companies requires searching scrutiny. Privatisation is not reform merely because ownership changes. Selling protected monopolies with inflated revenue entitlements, unresolved legacy liabilities or weak performance obligations could entrench the very inefficiencies the broader programme is meant to eliminate. The state must not raise sale valuations by shifting historical costs onto consumers. Transactions should be judged by enforceable reductions in losses, improved recoveries, service quality, investment discipline and transparent network access—not merely by proceeds to the exchequer.
The same test applies to electricity-market liberalisation. Competitive trading will mean little if wheeling charges, cross-subsidies and ad hoc levies make direct purchases uneconomic. Competition should reveal and reduce the true cost of supply, not be engineered to preserve incumbent revenues. Otherwise, Pakistan will merely relabel its monopoly arrangements.
The reform programme therefore risks defeating itself. The government may save money by cancelling unnecessary generation projects, only to lose those gains through distribution tariff claims. It may promise integrated planning while retaining overlapping entities and unaligned regulators. It may privatise DISCOs without creating meaningful competitive pressure or accountability. Unless these measures are designed as a coherent programme, each will weaken the others.
Recent initiatives have reopened questions neglected for too long. The next phase requires fewer, clearly accountable institutions; aligned regulation; credible least-cost planning; commercially disciplined distribution companies; and tariffs that reward efficiency rather than recover accumulated failure. Progress should be measured by whether projects that fail the least-cost test are stopped, distribution losses and costs decline, and industrial and household consumers receive more reliable power at sustainable prices—not by how many decisions continue to demand attention at the top.
Copyright Business Recorder, 2026
Comments