Pakistan's power sector reforms deliver Rs143bn savings

June 12, 2026 (MLN): Pakistan has achieved significant milestones in the energy sector over the past year, with the government implementing far-reaching reforms aimed at strengthening energy security, reducing costs and ensuring long-term sustainability.

Finance Minister Muhammad Aurangzeb said on Friday, while presenting the Federal Budget 2026-27 in the National Assembly.

The finance minister described energy as the lifeline of the economy and said comprehensive reforms had been introduced across the power, oil and gas sectors despite regional challenges.

He said the government's long-term objective was to achieve energy self-sufficiency, provide affordable electricity to consumers and gradually reduce reliance on sovereign guarantees.

Finance Minister Aurangzeb said the power sector was undergoing the most extensive reform process in its history.

Improved financial discipline and operational efficiency enabled the government to save more than Rs143 billion in subsidies during the outgoing fiscal year compared with the budgeted allocation.

He emphasized that the savings were achieved through structural reforms and enhanced efficiency rather than by transferring the burden to consumers.

The minister said negotiations with Independent Power Producers (IPPs) had also produced substantial benefits, with measures expected to generate savings of approximately Rs3.7 trillion.

Highlighting electricity market reforms, Finance minister Aurangzeb said the government formally launched the Competitive Trading Bilateral Contract Market (CTBCM) in January 2026, marking a major shift toward a market-based electricity system.

Under the new framework, Pakistan's first competitive auction for around 800 megawatts of electricity is scheduled for September 2026, allowing power transactions to take place through competitive market mechanisms.

He noted that the country was moving away from the traditional single-buyer model backed by sovereign guarantees and transitioning towards a competitive electricity market.

Calling it a fundamental restructuring of Pakistan's power economy, the minister said the reform would enhance efficiency and attract greater private-sector participation.

Finance minister Aurangzeb also announced a nationwide exercise during the current fiscal year to identify, register and verify all subsidized electricity consumers.

The initiative will support the launch of a Direct Subsidy Mechanism from January 2027.

Under the new system, subsidies will be targeted only at eligible consumers through a model similar to the Benazir Income Support Programme (BISP).

On circular debt, the finance minister said the government had successfully achieved net-zero accumulation in the power sector during the current fiscal year, preventing any further increase in liabilities.

He added that financing arrangements worth Rs1.225 trillion had been finalized to address the existing stock of circular debt.

The minister further highlighted reforms at the National Transmission and Dispatch Company (NTDC), where transmission, system operation and market operation functions are being separated to improve efficiency and facilitate the transition to a competitive electricity market.

Reaffirming the government's commitment to the energy sector, Finance minister Aurangzeb said sustainable reforms would continue to strengthen the industry, attract investment and ensure reliable and affordable energy supplies for consumers nationwide.

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