Islamabad — The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has urged the National Electric Power Regulatory Authority (NEPRA) to conduct an independent capacity audit of Pakistan’s existing power generation fleet before approving any new projects proposed under the Indicative Generation Capacity Expansion Plan (IGCEP) 2025–35.
In its comments submitted on the Integrated System Plan (ISP) 2025–35 — which includes the IGCEP and Transmission System Expansion Plan (TSEP) — FPCCI argued that Pakistan’s power sector crisis stems not from a shortage of generation capacity, but from poor utilisation, locational imbalances, and weak industrial growth policies.
The business community stated that the country already possesses surplus electricity generation capacity, warning that adding more projects without addressing structural inefficiencies would further increase circular debt and consumer tariffs.
According to FPCCI, the current system suffers from a major structural imbalance where capacity payments remain fixed throughout the year, while hydropower output and residential demand fluctuate seasonally. It stressed the need for reforms such as capacity payment caps, budgetary support for strategic deviations, and a credible industrial demand growth strategy.
The federation noted that under the Low Business-as-Usual (BAU) scenario, electricity demand is projected to rise modestly from 136,760 GWh in FY2024 to 180,605 GWh by FY2035, representing a compound annual growth rate of only 1.8 percent.
Peak electricity demand is expected to reach 35,521 MW, while under the Demand-Side Management (DSM) scenario, peak demand falls to 28,622 MW — nearly 20 percent lower — indicating that efficiency and utilisation improvements are more critical than additional capacity.
FPCCI also highlighted the inclusion of 8,120 MW of net-metering capacity in the plan, describing it as evidence of a growing shift toward behind-the-meter solar generation. However, it argued that the proposed battery energy storage system (BESS) requirements remain underestimated despite rising renewable energy penetration.
The federation criticised the allocation of only 800 MW for “market-based” power procurement, calling it insufficient as it represents merely 1.3 percent of projected capacity by FY2035. It urged the government to abolish the quota and require all future power projects to be procured through the Competitive Trading Bilateral Contract Market (CTBCM).
FPCCI further argued that the plan implies reserve margins of 50–80 percent throughout the planning period — significantly above the international norm of 15–20 percent — indicating a structural oversupply of electricity generation.
The business body maintained there was no economic justification for additional capacity additions over the next three years beyond projects already committed. It noted that installed generation capacity is expected to rise from 39,591 MW in FY2024 to between 62,657 MW and 70,720 MW by FY2035, while projected peak demand would remain between 30,940 MW and 34,069 MW under the rationalised scenario.
FPCCI also questioned demand forecasts under the high and medium growth scenarios, calling them “capacity-justification forecasts” rather than realistic projections. It pointed out that industrial electricity consumption remains severely depressed, with industries reportedly operating at only 35 percent of maximum demand indicator (MDI) and 13 percent of sanctioned load.
The federation challenged assumptions regarding future self-generation, citing the import of nearly 22 GW of solar panels in 2024 and a 2.8 percent decline in grid electricity sales.
It also warned that the plan failed to incorporate rupee depreciation risks, noting that every 5 percent depreciation could raise capacity payments by Rs1.5 to Rs2 per unit.
FPCCI raised concerns over inconsistencies in the treatment of renewable energy projects, hydropower schemes in Azad Jammu and Kashmir and Khyber Pakhtunkhwa, as well as project portfolios in Punjab across different IGCEP versions.
The federation further warned that excluding Karachi’s renewable energy optimisation from planning could result in costly long-distance transmission investments, despite Karachi contributing nearly 60 percent of Pakistan’s manufacturing GDP.
FPCCI also criticised the use of dispatch-based plant factors in simulations, arguing that the approach ignores contractual take-or-pay obligations and understates actual capacity payment liabilities.
The federation highlighted a discrepancy of 1,811 MW between installed and derated capacity, which it said directly affects reserve margins and tariff calculations.
It also pointed to chronic delays in hydropower, coal, and nuclear projects, warning that delays in projects such as the Diamer-Bhasha Dam could expose consumers to significant unplanned capacity payment burdens.
Additionally, FPCCI noted that the TSEP 2025–35 is based on the older IGCEP 2024–34 instead of the updated 2025–35 version, making the overall system plan internally inconsistent.
The federation also highlighted transmission bottlenecks, particularly delays in the 500 kV Matiari–Moro–Rahim Yar Khan transmission corridor, which it said had resulted in stranded generation capacity in southern Pakistan while northern consumers continued facing higher electricity tariffs.
Calling the ISP 2025–35 a supply-driven plan lacking a realistic strategy for demand growth and load factor improvement, FPCCI warned that approving it in its current form would worsen Pakistan’s circular debt crisis.
The federation noted that annual capacity payments have already exceeded Rs1.8 trillion, describing them as a massive quasi-fiscal burden passed on to consumers through electricity tariffs.
It further warned that the proposed plan could create additional obligations worth $47.13 billion in present value terms, potentially adding Rs700 billion to Rs1 trillion annually in new capacity payments during FY2030–35.
FPCCI reiterated its demand that all future power projects from FY2027 onward should be procured exclusively through the CTBCM or financed directly through the federal budget, strongly opposing any new negotiated power purchase agreements (PPAs).
The federation urged NEPRA to return the plan to the Independent System and Market Operator (ISMO) with binding directions for revision before granting approval.
Story by Mushtaq Ghumman
