As Pakistan pushes ahead with ambitious power sector reforms, foreign investors have voiced increasing concerns over the implementation of these changes, highlighting significant gaps in the country’s approach. The Overseas Investors Chamber of Commerce & Industry (OICCI) has raised alarms over the lack of regulatory clarity, institutional weaknesses, and the unpredictability of pricing, all of which are undermining investor confidence. While Pakistan aims to transition towards a competitive power market, these reforms are at risk of destabilizing the sector rather than achieving the intended liberalisation.
At the heart of the reforms is the shift towards a Competitive Trading Bilateral Contract Market (CTBCM), which aims to allow large consumers to purchase electricity directly from generators, bypassing the state-run distribution companies (Discos). This move promises efficiency and competition but has raised concerns among investors about the lack of a transparent framework, weak institutional capacity, and the absence of cost-reflective wheeling charges for using transmission and distribution networks. These issues have prompted OICCI to call for actionable reforms that address not just cosmetic policy changes but also deeper structural weaknesses that threaten the success of the market liberalisation.
One of the core issues identified by OICCI is the absence of a clear wheeling framework, which could destabilize the sector. Wheeling charges, which are the fees paid for using the transmission and distribution networks, are a fundamental part of the new market structure. However, these charges have yet to be unbundled into transparent components, making it difficult for investors to assess costs accurately. Without clarity on these charges, the viability of bilateral contracts within the CTBCM is at risk, weakening investor confidence in the long-term sustainability of the reforms.
The concerns raised by OICCI reflect a broader dilemma faced by Pakistan’s power sector, which is grappling with issues such as circular debt, inefficient Discos, and governance failures. These challenges have long hindered efforts to modernise the sector, and OICCI’s proposals warn that the current approach to market liberalisation could exacerbate existing problems rather than resolve them. In particular, the premature expansion of wheeling allocations without sufficient improvements in grid performance and regulatory readiness could destabilize already struggling Discos, potentially deepening their financial crisis.
OICCI’s call for regulatory clarity and predictable pricing underscores the need for a stable and transparent market framework. The chamber has expressed concern that poorly designed liberalisation could lead to further market distortions, which would undermine the competitiveness of Pakistan’s power sector. For foreign investors, the lack of long-term cost certainty and the possibility of policy reversals driven by fiscal stress represent significant risks. This unpredictability is one of the key reasons why investors remain cautious about committing capital to the sector.
In addition to regulatory and pricing concerns, OICCI has highlighted the critical importance of modernising Pakistan’s power grid. Without addressing the infrastructure weaknesses—such as transmission bottlenecks and outdated equipment—the country will struggle to support open-access trading, which is essential for a competitive market. The grid’s current state limits settlement efficiency, reliability, and investor confidence, making it a major stumbling block for the successful implementation of power sector reforms.
Moreover, OICCI has urged the government to integrate climate and trade considerations into the power sector reform process. The chamber advocates for the establishment of green bilateral contracts under CTBCM, which would allow exporters to directly access renewable energy. Given the increasing global pressure on exporters to meet carbon standards, access to clean power has become a commercial necessity. However, despite ambitious renewable energy targets, Pakistan’s regulatory framework still fails to facilitate green contracting for industrial users, missing an opportunity to align the power sector with global sustainability trends.
The frustration expressed by OICCI is not just about policy details; it reflects a deeper concern over Pakistan’s ability to implement meaningful reforms. The chamber’s proposals call for a single-window, time-bound regulatory approval framework to streamline bureaucratic processes that currently hinder investment. The existing delays and overlapping mandates discourage long-term capital inflows and expose weaknesses in the country’s governance structures.
As Pakistan’s power sector reforms move forward, OICCI’s proposals serve as a critical reminder of the challenges facing the sector. The proposals highlight the tension between liberalisation and financial sustainability, stressing the need for reforms that are not only efficient but also financially viable. Without a clear, predictable regulatory framework and robust institutional capacity, Pakistan’s ambitious power sector reforms risk deepening uncertainty rather than resolving it.
