ISLAMABAD: The Power Division has claimed that all benchmarks agreed upon with the International Monetary Fund (IMF), including the privatisation of Power Distribution Companies (Discos) are progressing according to plan.
In a conversation with Business Recorder, an official stated that the first structural benchmark was related to the privatisation of Discos. The government is prepared for this, as a Financial Advisor has already been hired, and the process has begun.
Another key target was to maintain circular debt at or below Rs 461 billion by December 2024.
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However, the official emphasized that the Power Division’s performance in managing circular debt is better than expected, though specific details were not provided. Reports on circular debt in the power sector are also part of the ongoing actions.
Regarding reform efforts, the official mentioned that the National Transmission and Dispatch Company (NTDC) is in the process of bifurcating into two entities: National Grid Company Projects (Projects) and National Grid Company Assets (NGC Assets). Additionally, a proposal to establish an Independent System and Market Operator (ISMO), merging the system operator functions of NTDC with the market operator functions of the Central Power Purchase Authority (CPPA), has already been approved and is moving towards finalization.
Another reform action involves the implementation of Quarterly Tariff Adjustments (QTAs), which are currently being enacted, with the hearing for the second quarter already completed. On the issue of the Competitive Trading Bilateral Contract Market (CTBCM), the official noted that progress is satisfactory. The IMF has emphasized the need for responsible implementation.
“The Integrated Generation Capacity Expansion Plan (IGCEP) will provide a clearer picture of how much capacity will be available for the competitive market,” the official said. “The revised IGCEP is currently under review and will be submitted to the regulator soon.”
Two key factors that will affect the success of the CTBCM are the volume of available capacity and wheeling charges. Muhammad Ali, the Prime Minister’s Special Assistant (now promoted to Advisor), informed the Senate Standing Committee on Power last week that the proposed wheeling charges will be reduced to Rs 12/kWh, down from an earlier estimate of Rs 26/kWh.
The official noted that the Power Division might not necessarily agree to this proposed rate, as it must consider its own tariff structure.
“There are many factors to consider before any decisions are made,” the official remarked.
The shift of Captive Power Plants (CPPs) to the national grid, which was also a structural benchmark, has been completed through an increase in gas rates and the imposition of a levy.
“The IMF is lenient on reforms, but they are very strict about meeting the indicative targets and structural benchmarks,” the official added. “Performance is evaluated based on these targets.”
According to the IMF’s Staff Report, Pakistani authorities assured the Fund that, with the help of a Technical Advisor, they would complete all necessary policy actions to prepare two Discos for privatisation by the end of January 2025. This includes updating tariff guidelines to align with the Discos’ supply and distribution licenses, deciding on the treatment of existing Disco employees, and launching a communications campaign to inform the public.
However, these actions have not yet been fulfilled.
Additionally, commitments such as privatising inefficient power generation companies (Gencos) and converting coal-fired power plants have also not been met.
Copyright Business Recorder, 2025
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