Pakistan’s power sector stands at a crossroads. The Power Division has shown much needed improvement under the leadership of Minister of Power and crisis response are better than before. Tariff has also come down substantially, but good administration is not reform. If the Competitive Trading Bilateral Contract Market (CTBCM) is launched hastily, without fixing its flaws, it risks becoming another expensive illusion.
After a decade of planning and billions spent on IT frameworks, CTBCM still lacks credibility. Consultation has been shallow. A few roadshows in select cities and seminars in universities are showcased as stakeholder engagement. But industry, the real stakeholders aka industrial associations and chambers, remain excluded. Critical questions are brushed aside. When smaller industries asked why only 1 MW users qualify in a seminar, the reply was simply: “tough luck.”
Contradictions run deep. Hybrid consumers, which were once declared “impossible” because “you cannot be partly regulated and partly deregulated” are now being quietly considered. International models are cited when convenient, ignored when not. Yet none of those models carry Pakistan’s crushing burden of Rs 17.06 per unit in capacity charges, which is almost 50 percent of electricity tariff (excluding taxes and surcharge), which distort our tariffs far beyond regional competitors.
The design weakens distribution companies (Discos) by stripping away their best-paying customers and reducing them to “Suppliers of Last Resort.” Left with subsidized, theft-prone segments, DISCOs are trapped in losses. In FY2025 alone, these losses cost the exchequer Rs 397 billion. Even when “improved,” DISCOs remain a fiscal black hole. Unless they are allowed ring-fenced supply companies to compete, they will remain subsidy dependent, will keep passing their losses in CD, draining taxpayers indefinitely.
To make matters worse, an arbitrary 800 MW cap for 5 years has been inserted into the CTBCM framework which was never part of the original design or Nepra policy. Such limits undermine competition, reduce investor confidence, and signal regulatory uncertainty.
CTBCM also does not resolve the subsidy trap; it merely repackages it. When bulk consumers leave the grid, stranded capacity costs don’t disappear; they are dumped on those left behind. The wheeling charges of Rs 12.5 per unit, plus the bid price, disguise this reality. The same mistake was made with net metering: popular at the start, but financially unsustainable once costs mounted.
Pakistan’s challenge is not high variable energy costs; those remain globally competitive. The problem is structural: capacity payments, take-or-pay fuel contracts, and cross-subsidies. Instead of tackling these fundamentals, CTBCM could possibly worsen them. There are no measurable benchmarks or milestones against which success can even be judged.
What we see instead is a rush to launch for optics. After repeated delays, the pressure is to show “progress” on paper, regardless of whether the design works in practice. But reforms built on optics rarely endure. Subsidy-funded, loss-making DISCOs are already at the heart of circular debt. CTBCM, as it stands, risks making that burden even heavier.
Our Industry does not fear competition; it thrives on it. But competition must be fair, rules must be clear, and all participants must be viable. For CTBCM to succeed, DISCOs must be allowed ring-fenced competitive supply arms, subsidies must be phased out transparently, and capacity payment distortions must be addressed. Without these corrections, CTBCM will not be a market. It will be another selective opportunity for a few, paid for by everyone else.
Like many “reforms” before it, CTBCM will be celebrated at launch and regretted in hindsight.
Copyright Business Recorder, 2025
The writer is an avid power sector expert and a leading industrialist from Karachi. He can be reached at [email protected]
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