Business Recorder Editorials 15th September 2026

Power market: from paper to practice

EDITORIAL: Power regulator Nepra’s approval of uniform Use of System Charges (UoSC) is an important step towards finally giving substance to Pakistan’s long-delayed competitive electricity market.

The decision attempts to address a fundamental requirement of an open-access regime: consumers should be able to choose their electricity supplier without facing an arbitrary difference in the cost of using the same national grid.

The timing is particularly important. The Commercial Market Operations Date was declared in January, with the first competitive auction scheduled for June, yet the supporting tariff architecture has continued to evolve. Without a predictable and non-discriminatory wheeling charge, the much-touted Competitive Trading Bilateral Contract Market (CTBCM) would remain more a policy aspiration than a functioning market. Nepra’s decision, therefore, fills an important regulatory gap.

The principle itself is difficult to dispute. Whether a bulk consumer buys electricity from a distribution company or an alternative supplier, the transmission and distribution network being used is essentially the same. Charging different network users simply because they have chosen different suppliers would defeat the purpose of competition. Nepra, therefore, is right to insist that UoSC should be supplier-neutral and uniformly applied.

Be that as it may, the structure approved by the regulator also highlights the extent to which Pakistan’s electricity market remains burdened by legacy arrangements. The UoSC does not merely represent the cost of moving electrons through the grid. It incorporates transmission and distribution charges as well as cross-subsidies, while stranded costs and the Debt Servicing Surcharge can add further layers to the bill. For consumers participating in the competitive wheeling auction, variable charges range from Rs6.23 to Rs19.62 per unit, while those opting for open access outside the competitive auction face considerably higher charges because of stranded costs.

This is where the real test of the wholesale market begins. Competition cannot simply mean allowing consumers to change suppliers while leaving virtually every legacy cost embedded in the system. If the alternative supplier can compete only on the residual portion of the electricity bill after cross-subsidies, capacity obligations, debt servicing and stranded costs have been loaded onto the wheeling consumer, the scope for genuine price discovery will remain limited.

The treatment of K-Electric is also significant. The Power Division wanted any financial gap arising from applying uniform UoSC to KE to be recovered through an additional charge on wheeling consumers. Nepra rejected this approach, correctly recognising that selectively burdening open-access consumers would itself create discrimination between otherwise similarly placed consumers. The decision to spread the additional charge across both open-access and supplier-of-last-resort consumers is more consistent with the principle of uniformity.

Perhaps more importantly, Nepra has resisted another temptation that has repeatedly undermined electricity-sector reforms: shifting the cost of uniformisation onto the relatively smaller pool of consumers who are willing to leave the regulated market. The Power Division had proposed recovering inter-Disco differentials from wheeling consumers through prior-period adjustments. Nepra instead opted to use the existing mechanism for uniform consumer-end tariffs. This is the more defensible approach because, otherwise, competitive consumers would effectively be penalised for choosing competition.

There is, however, a significant unresolved issue in the treatment of transmission and distribution losses. Nepra has approved a uniform loss factor of 8.04 percent for 11kV consumers and 1.51 percent for those connected at 132kV. But actual losses vary considerably across Discos. Applying a uniform factor can consequently produce an energy surplus in a relatively efficient Disco and a shortfall in a high-loss territory. The regulator has deferred an adjustment mechanism because ISMO’s (Independent System and Market Operator’s) proposal had not been sufficiently deliberated.

This should not be allowed to become another unresolved adjustment sitting quietly in the system until it eventually appears as a retrospective charge. Pakistan’s power sector has accumulated enough experience of tariff decisions being delayed, costs being parked and subsequently passed on to consumers. A competitive market requires certainty not only over the headline wheeling charge but also over how deviations, losses and legacy costs will be reconciled.

The regulator’s clarification that UoSC will be periodically adjusted is therefore understandable, since network costs cannot realistically remain frozen. But the adjustment mechanism must be transparent, formula-based and timely. The objective should be to prevent the competitive market from inheriting the same culture of delayed adjustments that has plagued the conventional electricity tariff regime.

The larger issue is that CTBCM (Competitive Trading Bilateral Contracts Market) cannot be treated as merely another tariff reform. It represents a profound change in the way Pakistan’s electricity sector is organised. For decades, the consumer had little meaningful choice over the source of electricity. The vertically integrated structure, regulated tariffs, cross-subsidies and guaranteed recovery mechanisms were built around that reality. A wholesale market, by contrast, requires consumers to have the ability to make commercial choices and generators and suppliers to compete on price and service.

That transition will inevitably expose inefficiencies that the existing system has been able to socialise across the consumer base. It may also create uncomfortable questions about who should bear stranded capacity costs, how cross-subsidies should ultimately be funded, and whether inefficient Discos should continue to have their costs pooled with efficient ones. These questions cannot be avoided indefinitely if competition is to mean more than a change in billing arrangements.

Nepra deserves credit for establishing the basic principle of a level playing field. But the real success of CTBCM will be measured not by the notification of UoSC, but by whether consumers actually have credible supplier choices, whether generators compete meaningfully, whether network costs become more efficient, and whether the system gradually moves away from blanket cross-subsidisation.

The government should now resist the temptation to over-administer the emerging market. The regulator must protect network integrity and prevent market abuse, but competition should increasingly determine commercial outcomes. Most importantly, all remaining tariff, loss and stranded-cost adjustments should be dealt with transparently, and in a timely manner.

Pakistan has spent years talking about a competitive electricity market. The UoSC decision takes the process one step closer to reality. The next challenge is ensuring that the market is not merely competitive on paper, while the old costs and inefficiencies continue to be socialised underneath it.

UN rebuke to India

EDITORIAL: The findings of the UN Committee on the Elimination of Racial Discrimination (CERD) should concern anyone who believes that India’s constitutional promise of equality is more than a formal declaration. The committee notes reports of large-scale violations perpetrated by law enforcement officials against ethnic and ethno-religious groups and non-citizens.

These included racially motivated violence, extrajudicial killings, arbitrary and prolonged detention without due process, torture, and sexual violence against tribal peoples, Dalits, Bengali-speaking Muslims, migrants and asylum-seekers, all of which points to a profound gap between constitutional principles and ground realities.

India’s Constitution envisages a secular and pluralistic republic in which citizenship, rather than religion, caste or ethnicity, determines rights and dignity. Yet, under BJP rule, India’s political mainstream has increasingly been shaped by Hindutva — an ideology that places Hindu identity at the centre of the national project. This ideological shift is difficult to reconcile with the constitutional vision of an India in which all citizens, regardless of faith or social origin, enjoy equal protection of the law.

The problem is not merely ideological. When the political establishment repeatedly frames minorities, migrants and other vulnerable communities through the prism of religious or ethnic identity, it legitimises discrimination and creates space for abuses by state authorities. CERD’s concerns over Bengali-speaking Muslims and Rohingyas are therefore especially significant. Identity checks, racial profiling, arbitrary detention and forced returns are not simply administrative matters; when they disproportionately target already vulnerable groups, they become part of a wider pattern in which religion, citizenship and belonging are increasingly used to discriminate against minorities.

CERD’s findings lend considerable international weight to growing concerns over the marginalisation of Muslims, the normalisation of inflammatory anti-minority rhetoric and increasing pressure on dissenters, civil-society groups, and human-rights defenders.

Laws protecting minorities and disadvantaged communities mean little if law-enforcement agencies can act with impunity. Reports of extrajudicial killings, torture and arbitrary detention demand independent investigation and prosecution, not denial or deflection. Likewise, hate crimes cannot be effectively confronted when inflammatory political rhetoric is tolerated, or when those who expose abuses themselves face intimidation.

India’s democratic standing ultimately rests on whether its institutions protect minorities when doing so is politically inconvenient. Hindutva may be the BJP’s political creed helping it secure electoral success. The credibility of Indian democracy, however, depends not on the strength of its majoritarian politics, but on whether it can uphold equal rights for all of its multi-ethnic and multi-religious communities.