By SKM
May 18, 2025
ISLAMABAD: The IMF has asked the government to finalize the Integrated Energy Plan (IEP) by June end 2025 with a main focus on accelerating cost-side reforms to safeguard sector viability and improve competitiveness, ensuring timely implementation of power and gas tariff adjustments in line with costs to avoid further accumulation of circular debt in the Energy sector.
Apart from addressing structural impediments to stem circular debt (CD) flow, aiming for zero new flow by FY31, the Fund stressed the government to implement subsidy reform, including unifying gas pricing across indigenous gas and imported RLNG (WACOG—weighted average cost of gas) and adopting a new, targeted, and budgeted gas subsidy framework.
The Fund also asked the government as soon as possible to fully implement the new Competitive Trading Bilateral Contract Market (CTBCM) — new wholesale and retail power market and come up with a connectivity policy, facilitating service-level agreements between Distribution Companies (DISCOs) and Captive Power Producers (CPPs).
The IMF also asked the government to get passed Competitive Pricing and Logistics (CPL) legislation through parliament by end-May 2025 and increase private sector participation in distribution and transmission networks through DISCOs’ privatization/concessions and restructuring the National Transmission and Dispatch Company (NTDC). It also asked the government to enact amendments to the criminal code to institutionalize anti-theft procedures. Finalize Pakistan’s first Integrated Energy Plan (IEP) by end-June 2025.
The Prime Minister of Pakistan is being given a presentation tomorrow (May 20, 2025) on Integrated Energy Plan with an emphasis not to approve any summary of Power Division (PD) without input of the Petroleum Division and vice versa. The Funds wants the finalization of IEP by June end, 2025.
“On the issue of unifying gas pricing across indigenous gas and imported RLNG (WACOG), the federal government may not be able to implement Weighted Average Cost of Gas, the three provinces—Sindh, Baluchistan and KPK are opposed to blend RLNG and local gas for uniform pricing,” senior officials told this scribe.
The issue of blending RLNG and the local gas was initiated by the federal government in the CCI meeting, but the three federating units strongly refused to accommodate the argument, saying the distribution of natural gas is governed by the Article-158 of the Constitution. This is analogous of granting hydel profits to Khyber Pakhtunkhwa and the Punjab based on the Article-161 (2) of the Constitution.
“Sindh wanted the energy ministry (Petroleum Division) to desist from any attempt to include RLNG into the WACOG formula for determination of the tariff of natural gas and demanded to assure supply of locally produced natural gas to its consumers. “If the WACOG is introduced, then the cost of local gas for the industrial sector in Sindh, Balochistan and KPK would be increased.”
As far as circular debt is concerned in the gas sector, they said, it has hiked to Rs2.8 trillion whereas it stands at Rs2.4 trillion in the power sector. The Fund wants to ensure zero monthly flow in the circular debt by FY31. This issue will also be figured in the Integrated Energy Policy being presented to the Prime Minister on May 20.
As far as the setting up of the private power market is concerned, the government is on toes and to this effect, the National Electric Power Regulatory Authority (NEPRA) has approved the transfer of license from NTDC (National Transmission Despatch Company) to (ISMO) Independent System and Market Operator of Pakistan (Guarantee) Limited, a joint entity after merger of CPPA-G, the Market Operator and NPCC, the System Operator (SO) paving the way for establishing the private power market.
This is a paradigm shift in the existing power sector structure as the competitive wholesale electricity market or competitive trading bilateral contract market (CTBCM) regime is going to be introduced.
“Under this competitive regime, there will be a system of multi-sellers and multi-buyers of electric power. However, buyers will pay the transmission and distribution use of system charges also for the electricity they will trade bilaterally. Currently, the power sector investments are dominated by the government that also owns the power plants and sells electricity to the end consumers under a monopoly structure through its Discos having control on the network and supply business.” Ends
