A dialogue on energy sector reforms in Pakistan was organized by The Knowledge Forum in Karachi on October 10, where experts and policymakers stressed the urgent need to provide affordable energy to citizens and address the inefficiencies of the current power sector. Caretaker Sindh Minister for Revenue and Industry, Mr. Muhammad Younus Dagha, highlighted the challenges of Pakistan’s energy model, which is burdened by expensive contracts with Independent Power Producers (IPPs) and heavy reliance on environmentally harmful thermal power generation. He underlined that the country’s energy mix, based primarily on oil, gas, and coal, is unsustainable, both economically and environmentally, given that the sector accounts for nearly 46 percent of Pakistan’s total emissions.
Mr. Dagha emphasized the importance of exploring alternatives such as coal-to-liquid fuel technology, citing the example of South Africa where such measures helped reduce dependence on imported oil. He suggested that with proper investment, Pakistan could adopt similar approaches to lower energy costs. Dr. Khalid Waleed from the Sustainable Development Policy Institute explained that global shocks such as COVID-19 and the Russia-Ukraine conflict had significantly increased fuel prices worldwide. He reiterated that energy reforms are complex and long-term but argued that the right policy direction can yield meaningful progress. He also pointed to the risks Pakistan faces under the European Union’s Carbon Border Adjustment Mechanism, which could impose penalties on exports produced with coal-based power, further threatening Pakistan’s competitiveness in global markets. He stressed the need to phase out coal and invest in renewable alternatives while also tapping into opportunities in carbon markets, noting that Sindh has already sold $200 million worth of carbon credits from mangrove projects.
Industrialist Dr. Mirza Ikhtiar Baig focused on the high costs imposed by the IPP regime, which has rendered Pakistan’s industrial sector uncompetitive. He urged the government to stop using costly imported fuels and divert gas supplies towards industrial use instead of consumption as CNG. He suggested that IPP contracts be restructured on a competitive bidding model to ensure power is procured at the lowest rates, along with shutting down inefficient plants and improving recoveries in the sector.
Director of The Knowledge Forum, Ms. Zeenia Shaukat, noted that while Pakistan has increased its power generation capacity by 60 percent since 2014, there remains no clear link between energy production and economic growth. She highlighted that industries face on average 22 days of power outages annually, with nearly half of firms reporting frequent electricity shortages. She added that although households consume the largest share of electricity, the industrial sector suffers most from high costs, which in turn undermines economic growth.
The discussion concluded that without urgent reforms to make energy affordable, efficient, and environmentally sustainable, Pakistan’s economy will remain under severe stress, its industries uncompetitive, and its environmental commitments unmet.
