Pakistan moves towards energy market reform with ISMO approval

The Cabinet Committee on Energy on Wednesday, chaired by Prime Minister Shehbaz Sharif, approved the formation of an independent entity aimed at reforming Pakistan’s energy sector, according to Radio Pakistan.

The new body, the Independent System and Market Operator (ISMO), will enable consumers to purchase electricity from multiple suppliers, moving away from the current government-controlled system where it acts as the sole buyer of power.

Pakistan’s energy sector has faced longstanding challenges, including circular debt, power theft, and transmission losses, leading to blackouts and elevated electricity costs. The creation of ISMO is viewed as a crucial step toward addressing these issues by fostering competition, improving transparency, and attracting foreign investment.

The committee’s approval of ISMO marks a shift towards a more competitive, transparent energy market, which is expected to alleviate the financial burden on both the government and consumers. The decision, however, still requires final approval from the federal cabinet.

“ISMO will gradually phase out the government’s role as the sole buyer of electricity, transitioning the market into a multi-player, independent system,” a statement from the Prime Minister’s Office said. “This will allow consumers to purchase power from suppliers beyond the traditional distribution companies.”

The introduction of ISMO is expected to reduce circular debt, stabilise electricity prices, and ensure a more efficient power sector. The ISMO board will include energy sector experts to oversee operations and guide the transition.

PM Shehbaz emphasised the urgency of power sector reforms during the meeting, calling for efforts to reduce theft and transmission losses. “We are implementing priority-based measures to reform Pakistan’s energy sector,” he added.