Energy sector: power without accountability

Pakistan’s energy failures impose measurable economy-wide costs. Estimates put the annual cost of inadequate and unreliable electricity at least at $4.5 billion – equivalent to 1.7% of GDP – through lost economic activity and reduced household welfare. Analysis of circular debt also points to lower GDP, industrial output and export competitiveness, with an estimated $13 billion welfare loss from a 10% increase in that debt.

Energy is not the sole cause of poverty or despondency, but unreliable and costly supply weakens production, employment, household finances and trust in government. Meanwhile, institutions multiply faster than responsibility: each controls part of the system; none owns the whole.

The institutional map explains why. Ministries set policy, regulators set tariffs, companies run assets and special bodies intervene. The Power Division, PPMC, NEPRA, PPIB, PITC, NEECA, ISMO, NGC, EIDMC, public generators and DISCOs control different links in one chain; PPEPCA and OCAC represent influential upstream and downstream interests. Yet when prices rise, investment is stranded or debt is refinanced, each body can defend its file while none explains the bill. Every mandate should therefore specify what the institution decides, recommends and must deliver.

That fragmentation makes recent moves to establish integrated energy planning as a central management tool a welcome step. A single framework for power, petroleum and provincial priorities can align assumptions, data and investment choices. It will improve outcomes, however, only if planning also consolidates institutions: functions and datasets must be assigned clearly, duplicated reporting and approvals removed, and redundant units closed rather than preserved alongside the new system.

The first test of that framework is the federal–provincial divide. The provinces are not peripheral: Article 157 expressly provides provincial powers over electricity, including power houses, grid stations and transmission lines, and a CCI route for disputes. Article 172(3) provides joint and equal federal–provincial ownership of mineral oil and natural gas, subject to existing commitments. These constitutional powers require equally clear financial and operational responsibility.

That responsibility becomes concrete where jurisdictions overlap. KP’s Balakot hydropower project, for example, combines sovereign borrowing with provincial implementation; its financing documents should state who bears cost overruns, exchange-rate exposure, evacuation delays and repayment shortfalls.

Transmission presents the same boundary problem. Sindh’s STDC has held a provincial grid licence since 2019, while KP and Punjab also have licensed grid companies. These networks need not replicate the national system, but their investment plans, connections and charges must be coordinated with it.

Regulation can compound that boundary problem. The Sindh Regulation of Electric Power Services Act, 2023 created SEPRA, but its framework still leaves major instruments in development and recognises federal boundaries. A provincial regulator should close local gaps, not create another checkpoint for licensing, tariffs and appeals or blur accountability where the province also owns energy businesses.

That risk strengthens the case for examining a merged energy regulator. A unified body for electricity, gas and petroleum could close jurisdictional gaps, align cross-fuel pricing and investment, consolidate scarce technical capacity and give consumers and investors a clearer route for approvals and redress. Merger alone, however, would not cure weak governance. It would require statutory independence, specialised sector divisions, transparent decisions, protected provincial participation and separation from policy, ownership and commercial interests. The objective is integrated regulation – not a larger bureaucracy with the same overlaps.

The same principle applies to federal restructuring. NGC is the renamed NTDC, continuing the national transmission business while system operation, market operation and infrastructure delivery move to ISMO and EIDMC. A new name is not a new grid. Separation has value only if each transfer specifies assets, liabilities, staff and decision rights – and ends the predecessor’s responsibility for that function.

NGC’s recruitment illustrates the test. Its 2026 advertisements – for Chief Corporate Affairs Officer, Director General (Legal) and Deputy Manager (Audit) – do not prove appointments or net staff growth. They do require disclosure: which posts replace existing capacity, which add to it, what they cost and what spending disappeared after reorganisation? Without before-and-after figures for staffing, payroll, overheads and approvals, the public cannot distinguish reform from replication. Every new layer must justify its place on the electricity bill.

That distinction matters because institutional structure becomes public cost. The bill has no single budget line: departmental appropriations sit beside corporate overheads, regulatory fees, development spending, tariff-funded investment, subsidies, public equity and borrowing. An institution can look cheap while shifting far larger costs into tariffs, guarantees or delayed projects.

The 2026–27 federal budget allocates Rs830 billion to power-sector subsidies, including Rs248 billion for inter-DISCO tariff differentials, Rs163 billion for K-Electric tariff differentials and Rs252 billion for circular-debt containment. These are allocations, not audited expenditure, and not all are waste. But they show why counting office expenses alone trivialises the public exposure.

The same accounting discipline must extend to the provinces. Running costs, development allocations, project-company equity, loan counterpart funding and guarantees must reconcile with the accounts of bodies such as PEDO and STDC. Every transfer should name its recipient, purpose, repayment obligation and result. The accounting must also separate multi-year commitments from annual spending, subsidies from utility receipts, contingent guarantees from cash debt service, and overhead from investment.

Circular debt reveals where those costs ultimately land. The September 2025 arrangement provided Rs1,225 billion of financing – Rs660 billion in restructured loans and Rs565 billion in fresh funds  – repayable through the existing Rs3.23-per-unit surcharge. Refinancing may improve liquidity; it does not erase the cost. The test is practical: which decisions created the need, who could have prevented it, and what changed after the rescue? Without answers, financing merely funds the next cycle.

The fiscal burden begins in operational fragmentation. LNG purchases affect dispatch; dispatch affects DISCO costs; grid delays strand generation; rooftop solar changes demand and revenue; industrial tariffs alter competitiveness. No institution monitoring a single ledger can explain the system-wide result. Common assumptions, recorded departures and explicit allocation of resulting costs are essential.

OCAC shows how much coordination occurs outside formal regulatory lines. It is central to downstream oil operations, consolidating data, balancing supply and demand, coordinating import and export vessel schedules, supporting product reviews and freight-pool management, and flagging port, storage and logistics constraints. Yet no clear public framework holds it accountable for its assumptions, data, recommendations or coordination failures. Government and OGRA retain statutory authority, but OCAC’s de facto influence still requires transparent reporting and review.

Within the power sector, the equivalent issue is the boundary between monitoring and management. PPMC should monitor DISCOs, not run them. It should set transparent metrics, verify data and escalate failure – not issue informal operational directions and leave boards with the blame. Directors, in turn, should record external instructions, objections and financial consequences rather than cite interference as a blanket excuse.

Above both sectoral examples sits the army-led power-sector coordination mechanism, now an important centre of reform. It has brought ministries, regulators and state-owned companies around a single table and shaped work on contract renegotiation, capacity payments, market design, circular debt and institutional performance. That coordinating force can break bureaucratic deadlock, but it also creates an accountability obligation: its mandate, recommendations, directions and results should be recorded and reviewed through the civilian institutions legally responsible for each decision.

The stakes extend beyond governance to investment confidence. In February 2025, eight development finance institutions objected to Pakistan’s unilateral renegotiation of renewable-energy contracts; the government denied military coercion and described the negotiations as amicable. Because such disputes shape contract credibility and future financing, the decision record must show who directed what, under which authority and with what consequence.

These failures point to a practical reform sequence. Start with a sector-wide functional map. For every major function, name the decision-maker, consulted bodies, delivery owner and bearer of financial risk. Record transfers from predecessor bodies, including PEPCO-era functions now in PPMC or elsewhere.

Next, use integrated energy planning to align the structure: remove duplicate approvals and reporting lines, close redundant or legacy units whose functions have transferred, and preserve the separation of policy, ownership, regulation and operation. As part of that exercise, assess a phased merger of electricity, gas and petroleum regulation against clear tests: fewer jurisdictional gaps, lower compliance costs, stronger technical capacity, independent decisions and better consumer protection. Judge restructuring by overlaps removed, costs reduced and decisions improved – not by new names, boards or organograms.

Then give federal–provincial coordination a defined home in the constitutional machinery, including the CCI where applicable, with binding timetables and published decisions. Put network development under one coordinated investment plan. Settle regulatory jurisdiction before applicants are sent from office to office. Provinces should retain meaningful authority – and carry the matching financial and delivery obligations.

Finally, make accountability routine: quarterly reports, six-monthly reviews and a public action register naming owners, deadlines and evidence. Each entry should state the legal basis, delivery owner, cost of delay and expiry of any temporary task-force role. The register must expose coordination, not create another tier.

Pakistan does not need another nominal centre for energy. It needs a visible chain of decision, delivery and consequence. Citizens face deadlines, surcharges and disconnection for failing to pay; institutions should face an equally clear duty to explain who decided, who failed and why the public is paying.

Institutional responsibilities and accountability interfaces

This institutional map includes provincial and fiscal responsibilities. It is a functional map, not a claim that every organisation duplicates another. Legacy and successor names identify transfers of functions; they are not a headcount of active bodies.