Power Division claims steady progress on IMF’s privatisation goals for Discos

ISLAMABAD: According to the Power Division, all benchmarks agreed to with the International Monetary Fund (IMF), including the privatisation of Power Distribution Companies (Discos), are progressing as planned.

The first structural benchmark pertains to the privatisation of DISCOs, and the government is fully prepared, having already engaged a financial advisor and initiated the process, reported the Business Recorder.

Another major objective is to keep the circular debt at or below Rs461 billion by December 2024. An official from the Power Division highlighted that the Division’s management of circular debt was performing better than anticipated, although specific figures were not disclosed. Reports regarding the circular debt situation in the power sector remain part of the ongoing efforts.

Regarding reform initiatives, he noted that the National Transmission and Dispatch Company (NTDC) is moving forward with its bifurcation into two distinct entities: National Grid Company Projects (Projects) and National Grid Company Assets (NGC Assets). Furthermore, a proposal to create an Independent System and Market Operator (ISMO) has been approved, which aims to combine the system operator functions of NTDC with those of the market operator of the Central Power Purchase Authority (CPPA).

Another reform action in progress is the introduction of Quarterly Tariff Adjustments (QTAs), with hearings for the second quarter already completed.

Power Division proposes Rs392.5 billion PSDP for development projects in FY2025-26

Concerning the Competitive Trading Bilateral Contract Market (CTBCM), the official noted that the progress was satisfactory.

“The Integrated Generation Capacity Expansion Plan (IGCEP) will clarify how much capacity will be available for the competitive market,” the official stated. “The revised IGCEP is currently under review and will be submitted to the regulator shortly.”

Two critical factors influencing the success of the CTBCM are the volume of available capacity and wheeling charges.

Muhammad Ali, the Prime Minister’s Special Assistant (now promoted to Advisor), recently informed the Senate Standing Committee on Power that the proposed wheeling charges would be lowered to Rs 12/kWh from a previous estimate of Rs 26/kWh.

The transition of Captive Power Plants (CPPs) to the national grid, another structural benchmark, has been achieved through increases in gas rates and the implementation of a levy.

“While the IMF is somewhat lenient regarding reforms, they maintain strict adherence to meeting indicative targets and structural benchmarks,” the official added. “Performance is assessed against these targets.”

According to the IMF’s Staff Report, Pakistani authorities have assured the Fund that, with the assistance of a Technical Advisor, they will complete all required policy measures to prepare two Discos for privatisation by the end of January 2025.

This includes updating tariff guidelines in line with the Discos’ supply and distribution licenses, determining the future of existing Disco employees, and launching a public communication campaign.