ISLAMABAD: The government has reportedly rejected a proposal of National Electric Power Regulatory Authority (NEPRA) to pay pensions of GENCO employees from the sale proceeds of their assets instead of placing the financial burden on DISCO consumers, well-informed sources told Business Recorder.
Sharing the details, sources said the Cabinet Committee on Energy (CCoE), during its meeting held on September 10, 2020, conveyed the Cabinet Division’s decision on September 21, 2020, to immediately close GENCO power plants having an aggregate capacity of 1,796 MW and phase out the remaining plants with an aggregate capacity of 2,475 MW by September 2022.
The decision to immediately close the power plants with a capacity of 1,796 MW was implemented, and these plants were excluded from the generation licences of the respective GENCOs. Following the closure of these plants, their Capacity Purchase Price (CPP) was discontinued, which had been the only source for payment of salaries and pensions of the employees of these plants.
In view of the issue, the Economic Coordination Committee (ECC) of the Cabinet considered a summary submitted by the Power Division on September 23, 2021.
The proposal stated that 2,368 GENCO pensioners could be adjusted in the DISCOs or WAPDA responsible for disbursing their pensions. Similarly, 1,753 employees of the closed plants could be adjusted in DISCOs. Their pensions would subsequently be paid by the relevant DISCOs upon retirement, according to the rules applicable to those DISCOs. The respective DISCOs and WAPDA would, in turn, claim adjustment of the pension cost from NEPRA through their tariffs.
According to sources, in pursuance of the Federal Cabinet’s decision of September 2020, the remaining power plants were also closed in 2024, and the process for disposal of these old, defunct and redundant plants was initiated.
Following the closure, GENCOs faced a situation similar to that of 2020-21, with further discontinuation of CPP and the emergence of surplus human resources.
To determine the future course of action regarding the surplus workforce, a committee was constituted under the directives of the Prime Minister’s Office, headed by the Minister for Economic Affairs and Establishment. The committee, in its meeting held on February 4, 2025, decided that surplus GENCO employees would be absorbed in DISCOs against existing vacancies.
The Director to the Minister for Economic Affairs Division (EAD), in a letter dated April 30, 2025, conveyed that the committee’s decision had been submitted to the Prime Minister for perusal and that the Prime Minister had agreed with it. In compliance with the decision, 3,499 GENCO employees have been adjusted in DISCOs.
The Power Division further apprised that 4,990 pensioners were drawing monthly pensions from various DISCOs located in their vicinity. After making pension payments, the DISCOs receive reimbursement from the respective GENCOs. In addition, 116 pensioners were drawing pensions directly from their respective GENCOs.
The Power Division noted that GENCOs and DISCOs are companies fully owned by the Government of Pakistan. Their employees and pensioners have protected pensionary rights, while pension payments had previously been covered under the CPP component of the respective GENCO tariffs, which has now been discontinued.
According to the Power Division, if the employees and pensioners are transferred and allocated to DISCOs, the DISCOs will claim the resulting impact through their respective tariffs, replacing the GENCO payments through CPP. Therefore, there would be no additional impact on the consumer-end tariff.
It was proposed that 5,106 (4,990 plus 116) GENCO pensioners be adjusted in the DISCOs responsible for disbursing their pensions. Similarly, pensions of the 3,499 employees already adjusted in various DISCOs would be paid by the relevant DISCOs upon their retirement according to the rules applicable to those DISCOs. The DISCOs would subsequently claim adjustment of the pension cost from NEPRA through their tariffs.
The Power Division said the summary was circulated to the Ministry of Law and Justice, Finance Division, CPPA-G and NEPRA for their views and comments.
The Ministry of Law and Justice endorsed the proposal from a legal perspective, while advising the referring division to ensure compliance with financial and commercial requirements.
Finance Division endorsed the proposal in principle but suggested that details of the GENCO plants, machinery and other assets be included, along with the proposed utilisation of sale proceeds and whether such proceeds could be used for Voluntary Separation Schemes (VSS) and/or offsetting pension liabilities before transferring them to DISCOs.
CPPA-G considered the matter a policy-level decision and therefore offered no comments on the adjustment of GENCO pensioners following plant closures.
NEPRA also viewed the matter as a policy issue but recommended transferring GENCO sale proceeds to DISCOs into a separate pension fund. The income generated from the fund could then be utilised to offset pension liabilities and minimise the impact on consumer tariffs.
The Ministry of Energy (Power Division) subsequently forwarded the comments of Finance Division and NEPRA to GENCO Holding Company Limited (GHCL) to provide the requisite details regarding disposal proceeds and its considered views.
GHCL accordingly provided details of the proceeds from the sale of GENCO plants along with the proposed utilisation of the proceeds. It confirmed that no additional burden would be passed on to the consumer-end tariff due to the adjustment of pensioners in DISCOs, as the pension liability of GENCOs had previously been incorporated into their tariffs and would now be shifted to the tariffs of the respective DISCOs where the employees and pensioners are adjusted.
The Power Division maintained that NEPRA’s recommendation could create complications, as proceeds from disposal of GENCO assets are limited in nature, whereas pension liabilities are long-term obligations. Furthermore, pension costs are already being adjusted through tariffs and only the entity responsible for making the payments would be changed.
After discussion, the ECC approved the proposal submitted by the Power Division, which was subsequently ratified by the Federal Cabinet.
Copyright Business Recorder, 2026