Latest news with #DISCOs
Business Recorder
10 hours ago
- Business
- Business Recorder
The cost of irrational energy levies
The federal government's decision to impose a petroleum levy of Rs 77 per litre on furnace oil (HFO), supplemented by a carbon tax of Rs 2.50 per litre, adds Rs 84,742 per ton in taxes to a fuel that otherwise costs approximately Rs 130,000 per ton. For export-oriented textile manufacturers, many of whom depend on HFO-based captive power for uninterrupted production, this will severely undermine their viability. Under current market conditions, HFO-fired captive generation costs roughly Rs 33 per kWh, broadly equivalent to prevailing grid tariffs. Once the new levies are applied, generation costs surge to nearly Rs 51 per kWh, by over 50%. At this level, HFO-based power generation ceases to be economically viable, forcing textile firms into an untenable dilemma: continue operating at a severe loss or switch to an unreliable and, ultimately, more expensive grid supply. For most mills, switching to grid-supplied power is not a viable alternative, as HFO-fired captive generation is principally used by units lacking reliable DISCO connections. Across Pakistan—and particularly in urban industrial hubs such as Lahore and Karachi—DISCOs routinely decline new industrial hookups due to constrained infrastructure and transformer capacity. Where connections are technically offered, firms are presented with demand notices running into the tens of billions of rupees merely to secure a feeder line, with no guarantee of timely service: lead times for actual energization often extend to two or three years. Under these conditions, pursuing a formal grid connection is neither commercially nor operationally feasible, aside from enduring the frequent voltage sags and load-shedding that characterize grid supply. This punitive taxation of HFO follows the so-called 'grid transition levy' on gas consumption by captive-power users—a tax that the government itself concedes is incorrectly calculated yet refuses to rectify. Officially, the transition levy is intended to align the cost of captive power with grid tariffs. In practice, however, the levy calculation is based on peak-hour grid rates that apply for only four hours each day, it relies on an eight-year-old Nepra determination of captive O&M costs, a figure that has since doubled or tripled due to inflation and currency depreciation, and incorporates a series of arbitrary errors that artificially inflate the final rate, coercing efficient captive generators onto an unprepared grid. Over the past month alone, two major textile production units served by HESCO reported repeated outages, voltage fluctuations, and sudden trippings. These disturbances burned out feeders and control panels, inflicted heavy machinery damage, and disrupted tightly scheduled production lines. Similar incidents are occurring across multiple DISCOs, underscoring that Pakistan's electricity grid lacks both the capacity and reliability to absorb additional industrial loads. Rather than addressing these structural weaknesses through targeted grid investments, modernization of aging infrastructure, and expansion of generation capacity, the government has opted for a shortcut: tax all alternative energy sources until the grid becomes the sole available option. First gas, now HFO and even solar panels. On one hand, political rhetoric extols market-driven strategy and competitive pricing; on the other, regressive taxes are being wielded to coerce industrial users onto a system that is demonstrably incapable of meeting their needs. The economic repercussions extend far beyond individual factory bills. Pakistan's textile industry accounts for over 50% of export revenues, sustains millions of direct and indirect jobs, and underpins rural livelihoods through cotton cultivation. A unilateral surge in energy costs will erode global competitiveness, and potentially trigger plant closures or relocation of production to more stable energy markets. Already, the poorly designed levy on gas-fired captive generation has slashed captive gas demand by 90%, creating a 400 MMCFD RLNG surplus that the government cannot absorb and which worsens circular debt. The same error is now being applied to furnace oil—despite domestic oversupply, demand will collapse once the levy is imposed, forcing HFO to be exported at under Rs 100,000 per ton rather than sold locally at Rs 130,000. As a result, industry will rely on a grid powered largely by imported coal and RLNG, while domestic HFO is sold abroad at a loss. With demand destroyed, the levy will generate no revenue, import costs will rise, and domestic value addition in exports—through the use of local fuels—will decline. To reverse this trajectory, the government must take three immediate steps. First, suspend the new petroleum and carbon levies on HFO until a comprehensive impact assessment is completed, involving industry stakeholders, DISCO representatives, and energy experts. Such an assessment should quantify the cost differential between captive and grid power under current conditions, and model the long-term effects on export revenue, employment, and foreign exchange earnings. And even then, any levy should be imposed gradually to allow sufficient time for consumers to adjust. Second, the calculation of the grid transition levy must be corrected to reflect actual grid power tariffs and captive generation costs and eliminate arbitrary inflation. Finally, commit to a multi-year grid-modernization plan that addresses transmission bottlenecks, reduces line losses, and provides reliable power at a regionally competitive rate of 9 cents per kWh or below. Without these corrective actions, the government risks imposing a de facto production tax on Pakistan's most vital export sector—one that it can ill afford. Coercive levies may fill the treasury in the short term, but they undermine industrial resilience, drive up unemployment, and weaken foreign-exchange reserves through the hollowing-out of export capacity. In effect, policy is being used not to bolster markets, but to strangle them—and in the process, torpedo the very growth narrative that it purports to champion. A reversal of these levies, accompanied by a clear roadmap for grid improvement, will restore confidence among exporters, stabilize power costs, and ensure that Pakistan's textile sector remains a global competitor rather than a declining casualty of misguided energy policy. Copyright Business Recorder, 2025
Business Recorder
3 days ago
- Business
- Business Recorder
Karachi
Karachi appears to be Pakistan's orphaned child. Once the country's capital, it now holds the dubious distinction of being among the most unliveable cities in the world. Despite contributing over 20% to Pakistan's GDP and hosting around 10% of the nation's population, Karachi struggles significantly to complete critical projects like the BRT and K-4 water supply schemes. Videos highlighting its crumbling infrastructure became memes during the recent India-Pakistan clash, which speaks volumes. For decades, Karachi has absorbed a continuous influx of migrants from various regions of Pakistan, expanding rapidly and without adequate planning, thus becoming a hub for crime and unrest. Despite these challenges, the city has remained Pakistan's economic backbone, functioning as the nation's industrial centre and sole significant link to the global supply chain for seven decades. In short, Karachi has the potential to pull Pakistan out of its financial difficulties with minimal effort—provided it receives proper attention and prioritization. Instead, it consistently receives minimal support. Political parties routinely stage protests against the federal government for neglecting Karachi, yet minor changes. Consider the energy sector, for instance. Karachi hosts the country's only privatized power utility, K-Electric (KE). According to recent communications, KE has become the most improved DISCO since 2009 regarding transmission and distribution losses, reducing its aggregated technical and commercial losses from a staggering 43.2% to approximately 20.3% by 2024. Within Karachi alone, the exempted feeder network increased dramatically from a mere 6.6% to 70%. These achievements, supported by a complete management turnaround, have gained global recognition, including a Harvard Business School case study and positive World Bank reports. However, despite these notable improvements, KE faced significant setbacks, such as delays in the Multi-Year Tariff determination, hindering its financial planning. The private utility, intended as a model for other DISCO privatizations, was inexplicably left in limbo, ultimately punishing Karachi residents more than the company itself. Another example is the denial of Fuel Cost Adjustment (FCA) relief—a substantial amount of Rs4.69 per unit—to KE's customers in a recent NEPRA hearing. The justification given was to maintain a uniform tariff across the country, exemplifying bureaucratic rigidity and the shortsighted decisions of temporary ministers. Karachi is also burdened with inefficiencies from other DISCOs. For nearly two years, Karachi's consumers have borne the Power Holding Limited (PHL) surcharge—debt repayment they did not contribute to or benefit from. Now, due to a new banking agreement, this surcharge is extended for another six years, meaning 72 more months of inflated electricity bills for Karachi residents. Even if the government manages to find buyers for its other DISCOs—a considerable challenge—the current treatment of KE sends a negative message. Potential buyers witnessing such hurdles and neglect may reconsider their interest, fearing similar treatment. Karachi deserves better.
Business Recorder
4 days ago
- Business
- Business Recorder
Pakistan govt to recover Rs1.938trn from power consumers in 6 years
ISLAMABAD: The federal government is to recover $ 6.7 billion (Rs 1.938 trillion) in six years from power consumers across the country through Debt Service Surcharge (DSS) of Rs 3.23 per unit, which is being uncapped to meet any variation in recovery to meet the target, well informed sources in Power Division told Business Recorder. Central Power Purchasing Agency-Guaranteed (CPPA-G) and the scheduled banks alongwith allocated amounts will sign the pacts once clarity on worth of assets of few Discos is received by the Power Division. 'There is ambiguity on the total amount to be raised. It will be either 1.21 trillion, Rs 1.25 trillion or Rs 1.275 trillion,' the sources added. Nepra's decisions on KE tariffs: Power Div. flags potential consumers harm, urges revision The names of banks, which have entered into the agreement with the CPPA-G as Agent of power Distribution Companies are as follows: (i)Meezan Bank Limited ;(ii) Habib Bank Limited ;(iii) National Bank of Pakistan;(iv) Allied Bank Limited;(v) United Bank Limited ;(vi) Faysal Bank Limited ;(vii) Bank Al Habib Limited;(viii) MCB Bank Limited ;(ix) Bank Alfalah Limited;(x) Dubai Islamic Bank Limited;(xi) The Bank of Punjab ;(xii) Bank Islami Pakistan Limited;(xiii) Askari Bank Limited ;(xiv) Habib Metropolitan Bank Limited ;(xv) Al Baraka Bank Limited ;(xvi) Bank of Khyber ;(xvii) MCB Islamic and ;(xviii) Soneri Bank Limited. Last week, the federal cabinet approved the following proposals of Power Division with minor amendments in a couple of proposed clauses: (i) CPPA-G has been directed (as agent on behalf of DISCOs) to perform public service obligations and undertake related activities in relation to circular debt stock financing and settlement in terms of Section 7(4) read with Schedule II of the SOE Act as per the proposed terms reflected in the indicative term sheet (Annex-VII) to be executed by CPPA-G for and on behalf of DISCOs and execute 'CD Restructuring, Settlement and Subscription Agreement (CDRSSA)' between the Government of Pakistan, DISCOs and CPPA-G;(ii) Authorized the Ministry of Energy (Power Division) to execute relevant documents as may be required on behalf of the Government of Pakistan per the terms and conditions reflected in the indicative term sheet and to execute the Agreement;(iii) authorized the Ministry of Energy (Power Division) to direct DISCOs to execute relevant instruments and create such security as may be required for the purposes of the financing reflected in the indicative term sheet;(iv) approve the draft amendment in Section 31(8) of the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997 and the draft legislation be made part of the Finance Bill 2025-26;(v) approved immediate release to CPPA-G and utilization of Rs. 267 billion, already budgeted and available in power division demand no 33 under the head of GoP investment in DISCOs equity. Rs. 267 billion would be reduced to the extent of the K-Electric TDS utilization; (vi) approve technical supplementary grant of Rs. 393 billion from finance division demand no. 45 to power division demand no. 33 to be immediately released to CPPA-G under the head of GoP investment in DISCOs equity; (vii) authorized CPPA-G to utilize amounts to pay off the negotiated payables of Government-owned Power Plants (GPPs). Excess amount, if any, after payment of GPPs shall be utilized for payment to Uch-I & Uch-II for onward payment to OGDCL; (viii) authorized CPPA-G to utilize part of the proceeds raised under the aforementioned term sheet to settle and retire the outstanding debt obligations of Rs. 683.253 billion of PHL; (ix) authorized CPPA-G to disburse payments to the respective IPPs from the bank financing subject to waive Late Payment Interest (LPI) by the IPPs; (x) approve the draft amendments in Section 3(3) of the Sales Tax Act, 1990 and Section 113(3)(a) of the Income Tax Ordinance, 2001 and the draft legislation be made part of the Finance Bill 2025-26; (xi) the Term Sheet being negotiated is substantially lower than the banking sector benchmark/interbank profit rates, and to approve the exemption from the bidding under PPRA Rules; and (xii) approve the amendment in Rule-5 of the 'Pakistan Energy Sukuk Rules, 2019' as follows '5-Redemption. - The Sukuk shall be redeemable before maturity'. On June 18, 2025, the cabinet further directed that the amendments proposed in the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997 in the summary shall be further amended as presented during the Cabinet meeting, and will be made part of the Finance Bill, 2025 after legal vetting by the Law and Justice Division. The amendments proposed in the statutes will be made part of the Finance Bill, 2025 after legal vetting by the Law and Justice Division and amendments proposed in the rules about term sheets will be vetted from the legal point of view by the Law and Justice Division. Copyright Business Recorder, 2025
Business Recorder
4 days ago
- Business
- Business Recorder
Govt to recover Rs1.938trn from power consumers in 6 years
ISLAMABAD: The federal government is to recover $ 6.7 billion (Rs 1.938 trillion) in six years from power consumers across the country through Debt Service Surcharge (DSS) of Rs 3.23 per unit, which is being uncapped to meet any variation in recovery to meet the target, well informed sources in Power Division told Business Recorder. Central Power Purchasing Agency-Guaranteed (CPPA-G) and the scheduled banks alongwith allocated amounts will sign the pacts once clarity on worth of assets of few Discos is received by the Power Division. 'There is ambiguity on the total amount to be raised. It will be either 1.21 trillion, Rs 1.25 trillion or Rs 1.275 trillion,' the sources added. Nepra's decisions on KE tariffs: Power Div. flags potential consumers harm, urges revision The names of banks, which have entered into the agreement with the CPPA-G as Agent of power Distribution Companies are as follows: (i)Meezan Bank Limited ;(ii) Habib Bank Limited ;(iii) National Bank of Pakistan;(iv) Allied Bank Limited;(v) United Bank Limited ;(vi) Faysal Bank Limited ;(vii) Bank Al Habib Limited;(viii) MCB Bank Limited ;(ix) Bank Alfalah Limited;(x) Dubai Islamic Bank Limited;(xi) The Bank of Punjab ;(xii) Bank Islami Pakistan Limited;(xiii) Askari Bank Limited ;(xiv) Habib Metropolitan Bank Limited ;(xv) Al Baraka Bank Limited ;(xvi) Bank of Khyber ;(xvii) MCB Islamic and ;(xviii) Soneri Bank Limited. Last week, the federal cabinet approved the following proposals of Power Division with minor amendments in a couple of proposed clauses: (i) CPPA-G has been directed (as agent on behalf of DISCOs) to perform public service obligations and undertake related activities in relation to circular debt stock financing and settlement in terms of Section 7(4) read with Schedule II of the SOE Act as per the proposed terms reflected in the indicative term sheet (Annex-VII) to be executed by CPPA-G for and on behalf of DISCOs and execute 'CD Restructuring, Settlement and Subscription Agreement (CDRSSA)' between the Government of Pakistan, DISCOs and CPPA-G;(ii) Authorized the Ministry of Energy (Power Division) to execute relevant documents as may be required on behalf of the Government of Pakistan per the terms and conditions reflected in the indicative term sheet and to execute the Agreement;(iii) authorized the Ministry of Energy (Power Division) to direct DISCOs to execute relevant instruments and create such security as may be required for the purposes of the financing reflected in the indicative term sheet;(iv) approve the draft amendment in Section 31(8) of the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997 and the draft legislation be made part of the Finance Bill 2025-26;(v) approved immediate release to CPPA-G and utilization of Rs. 267 billion, already budgeted and available in power division demand no 33 under the head of GoP investment in DISCOs equity. Rs. 267 billion would be reduced to the extent of the K-Electric TDS utilization; (vi) approve technical supplementary grant of Rs. 393 billion from finance division demand no. 45 to power division demand no. 33 to be immediately released to CPPA-G under the head of GoP investment in DISCOs equity; (vii) authorized CPPA-G to utilize amounts to pay off the negotiated payables of Government-owned Power Plants (GPPs). Excess amount, if any, after payment of GPPs shall be utilized for payment to Uch-I & Uch-II for onward payment to OGDCL; (viii) authorized CPPA-G to utilize part of the proceeds raised under the aforementioned term sheet to settle and retire the outstanding debt obligations of Rs. 683.253 billion of PHL; (ix) authorized CPPA-G to disburse payments to the respective IPPs from the bank financing subject to waive Late Payment Interest (LPI) by the IPPs; (x) approve the draft amendments in Section 3(3) of the Sales Tax Act, 1990 and Section 113(3)(a) of the Income Tax Ordinance, 2001 and the draft legislation be made part of the Finance Bill 2025-26; (xi) the Term Sheet being negotiated is substantially lower than the banking sector benchmark/interbank profit rates, and to approve the exemption from the bidding under PPRA Rules; and (xii) approve the amendment in Rule-5 of the 'Pakistan Energy Sukuk Rules, 2019' as follows '5-Redemption. - The Sukuk shall be redeemable before maturity'. On June 18, 2025, the cabinet further directed that the amendments proposed in the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997 in the summary shall be further amended as presented during the Cabinet meeting, and will be made part of the Finance Bill, 2025 after legal vetting by the Law and Justice Division. The amendments proposed in the statutes will be made part of the Finance Bill, 2025 after legal vetting by the Law and Justice Division and amendments proposed in the rules about term sheets will be vetted from the legal point of view by the Law and Justice Division. Copyright Business Recorder, 2025
Arab News
6 days ago
- Politics
- Arab News
Pakistan asks distribution companies to ensure uninterrupted power supply to facilitate Muharram gatherings
iSLAMABAD: Pakistan's Energy Ministry on Sunday directed senior officials of distribution companies (DISCOs) to ensure uninterrupted power supply to facilitate religious gatherings next month during Muharram. Thousands of Pakistanis every year during the Islamic month of Muharram take part in religious gatherings and processions to pay tribute to Imam Hussain, the grandson of Prophet Muhammad (peace be upon him), who was martyred in the Battle of Karbala. In its letter, the ministry said Muharram is falling in July when heat waves are expected in many parts of the country. 'It is very much imperative that all necessary measures are taken to ensure uninterrupted electricity supply to facilitate these religious gatherings and avoid any inconvenience to the public,' the letter said. The ministry urged DISCOs to conduct thorough inspections of all transmission and distribution networks, particularly in areas where religious gatherings and processions are expected to take place. It also directed the companies to deploy dedicated emergency response teams on high alert throughout Muharram, especially on the 9th and 10th of Muharram when the main processions take place, to address any power disruptions immediately. The ministry instructed DISCOs to communicate with consumers, especially mosques and imambargahs, regarding any scheduled maintenance or potential load management measures to minimize inconvenience. 'Assign duty rosters to ensure 24/7 availability of technical and operational staff during Muharram to respond swiftly to any power-related issues,' the letter read. 'The sanctity of Muharram demands our utmost commitment to serving the public with diligence and respect,' it said. 'Any negligence in this regard will be viewed seriously.' The Energy Ministry directed DISCOs to submit a compliance report to the Power Division regarding the measures taken in this regard. Thousands of people suffer from power outages, lasting several hours each day, during the summers every year in Pakistan. Pakistan suffers from an energy crisis that stems largely from a gap in its energy supplies and electricity demand. The cash-strapped country lacks adequate resources to run its oil-and-gas-powered plants and imports most of its energy needs.
