ICCI calls for unbundling energy sector to promote competitive power market



ISLAMABAD – Sardar Yasir Ilyas Khan, President, Islamabad Chamber of Commerce & Industry (ICCI) said that Pakistan’s power sector was marred with multiple issues including high electricity prices for industrial, commercial and domestic consumers, rising circular debt, capacity payment issues, inefficient performance of GENCOs and DISCOS, high transmission and distribution losses and rising power theft losses, therefore, he urged that government should seriously consider to unbundle the power sector by encouraging private sector participation that would address all these issues and promote a competitive power market in the country. He said this while addressing a meeting of the ICCI Executive Body.

Sardar Yasir Ilyas Khan said the capacity payment obligation, which was Rs.488 billion in 2018 was projected to increase to over Rs.1.4 trillion by 2023 as system utilisation would stand at 55 per cent, compared to 84 percent in 2018. He said that these projections were not good for the economy as it would increase per unit cost of electricity and further enhance the cost of doing business in the country. He said that the circular debt has risen to Rs.2.15 trillion by 2020, which would create more problems for business and investment activities in the country. He said though the government has claimed that it has taken major initiatives for reducing the cost of power generation that would lead to Rs.300 billion impact over the next three years, however, he stressed that government should prefer unbundling the power sector vertically and horizontally and bring private sector players in the power sector through good incentives in order to promote a highly competitive power market.

ICCI President said that unbundling of banking and telecom sectors have brought phenomenal improvement in performance and service delivery of these sectors besides introducing competitive prices for the end consumers. He said that opening these sectors has also created plenty of new jobs apart from improving tax revenue for the government. However, keeping the generation and transmission of electricity in the public sector has not produced good results for the economy as it has made Pakistan’s energy cost as one of the highest in the region.

Sardar Yasir Ilyas Khan said that the standard package of reforms prescribed by the international donors for Pakistan also advocated for vertical and horizontal unbundling of power utilities, private sector participation and promoting competition in the power sector. He was of the view that opening the power sector for private sector would produce multiple benefits for the economy as it would reduce the fiscal burden of subsidies being given by the government to the power sector, bring operational efficiencies in the entities, improve financial sustainability and service delivery and reduce power tariffs for end consumers leading to low production cost and better growth of business and investment activities in the country.