Power Sector Reform Faces Critical Challenges as Market Liberalization Begins

Karachi: The introduction of the Independent System and Market Operator (ISMO) and the Competitive Trading Bilateral Contract Market (CTBCM) marks a pivotal juncture for Pakistan’s energy sector, according to Mian Zahid Hussain, a prominent industry leader. This reform aims to dismantle the inefficient single-buyer model, offering medium-to-large industries a chance to negotiate direct contracts with power generators. Such a shift is critical for enhancing the competitiveness of Pakistani products on the global stage.

Mian Zahid Hussain, President of the Pakistan Businessmen and Intellectuals Forum, highlighted that this new system allows Bulk Power Consumers to secure lower-cost energy, potentially boosting exports. However, he cautioned that the reform’s success is not assured due to two significant challenges: legacy debt and the inefficiency of distribution companies (DISCOs).

Hussain stressed the need for the government to protect the CTBCM from legacy costs, warning that imposing new surcharges would undermine the reform’s benefits. He called for immediate action to ring-fence the new market and prevent additional financial burdens on participants.

The inefficiencies of the ten state-owned DISCOs, described by Hussain as the “Achilles’ heel” of the power sector, pose a threat to the competitive market. He urged strong political commitment to privatization as a solution to these systemic issues.

Furthermore, Hussain highlighted the risk of a “two-tiered system” where large corporations gain from competition while small and medium-sized enterprises (SMEs) bear the cost of legacy issues. He advocated for aggregation models to enable SMEs to access the competitive market.

Emphasizing the need for active involvement of the private sector, Hussain called for reforms in distribution companies and support for ISMO’s autonomy. He also urged the business community to push for fair wheeling charges to ensure their interests are reflected in economic policies.