Pakistan: Sustainable Energy Sector Reform Program (Subprogram 3)

Sovereign Project | 47015-003

The Asian Development Bank is helping Pakistan improve the reliability and sustainability of its power sector through an ongoing policy reform program. The third phase supports policy actions to improve tariff and subsidy management and strengthen the environment for private sector investment. Ending the country's crippling power outages is crucial for boosting growth and improving quality of life.

Project Details

  • Project Officer
    Inoue, Yuki
    Central and West Asia Department
    Request for information
  • Country/Economy
  • Modality
    • Loan
  • Sector
    • Energy
Project Name Sustainable Energy Sector Reform Program (Subprogram 3)
Project Number 47015-003
Country / Economy Pakistan
Project Status Closed
Project Type / Modality of Assistance Loan
Source of Funding / Amount
Loan 3537-PAK: Sustainable Energy Sector Reform Program - Subprogram 3
Ordinary capital resources US$ 300.00 million
Loan: Sustainable Energy Sector Reform Program - Subprogram 3
Agence Francaise de Developpement US$ 108.00 million
Strategic Agendas Environmentally sustainable growth
Inclusive economic growth
Drivers of Change Governance and capacity development
Knowledge solutions
Private sector development
Sector / Subsector

Energy / Energy sector development and institutional reform

Gender Equity and Mainstreaming No gender elements

The Program will help the Government with the short-term stabilization measures and start the long-term restructuring for a sustainable power sector. The impact of the overall program will be a more reliable, sustainable, and secure energy sector that supports the country's economic growth. The outcome will be an improved reliability, sustainability, and affordability of the energy system.

The programmatic approach and subprogram 1 were approved on 24 April 2014 in support of the 2013 National Power Policy of the Government of Pakistan, which seeks to build an affordable, reliable, sustainable, and secure energy sector to support the countrys economic growth. The program, fully coordinated with the International Monetary Fund (IMF) under its extended fund facility, takes a phased approach over multiple years to provide dynamic, long-term support to multidimensional reforms, with subprograms that match the government's budget cycle. The IMF completed its final review of the program in September 2016. The World Bank and Japan International Cooperation Agency (JICA) cofinanced subprograms 1 and 2, and Agence Francaise de Developpement (AFD) will cofinance subprogram 3, which is the third and final year of the programmatic approach and builds on the reforms initiated during previous subprograms.

Project Rationale and Linkage to Country/Regional Strategy

Economic reforms are a priority of the Government of Pakistan. In 2017, the World Bank recognized Pakistan as among the countries with the most improved business environment. After 10 failed attempts, Pakistan successfully completed an IMF program in 2016. Apart from minor deviations, the results of the program were promising: (i) during FY2016, the economy grew by 4.7%, above the global growth of 3.1%; (ii) inflation was 0.8%, well below the IMF target of 4.0%; and (iii) the foreign reserves had more than doubled since June 2013. The IMF believes that as structural reforms take hold, bottlenecks will ease, growth will accelerate, and vulnerabilities will recede.

Energy data also demonstrate the positive results of the reforms: (i) load shedding in urban areas was reduced from 12 hours in FY2013 to 6 hours in FY2015; (ii) electricity losses were reduced, while collections increased; and (iii) better fuel management helped cut power generation costs. However, Pakistan's electricity generation capacity is about 5,500 megawatts short, and the inadequate energy supply has been a constraint to the economy. Further, only two-thirds of the population have access to power. Despite the improvements, persistent blackouts and brownouts negatively affect investor confidence and economic growth.

Since the 1990s, Pakistan has taken steps to restructure and improve its energy sector, but the results have been mixed and the expected outcomes were not always achieved. Previous reforms led to the unbundling of the Water and Power Development Authority into 15 corporatized entities: nine regional power distribution companies (DISCOs), four thermal power generation companies (GENCOs), the National Transmission and Despatch Company (NTDC), and the Water and Power Development Authority. Central Power Purchasing Agency Guarantee Limited (CPPA-G), the country's sole buyer and seller of electricity, used to be a unit within NTDC but became an independent corporate entity in 2015. The government fully owns all of these companies except for the Karachi Electric Supply Company, which was privatized in 2005. Independent power producers generate 56% of the country's power. The National Electric Power Regulatory Authority (NEPRA), established in 1997, sets tariffs, issues licenses, and regulates the sector

Subprogram 3 was prepared in coordination with the AFD, the IMF, JICA, the World Bank, and other development partners to increase the program's overall economic impact in Pakistan and meet the following objectives:

1. Clearly define functions, authority and responsibilities of the Federal Government and NEPRA through introduction of amendments to the one of the fundamental legislations of the electricity sector NEPRA Act;

2. Improve of financial sustainability of the sector through improvements in management and gradual elimination of electricity sector payables and controlling subsidy levels;

3. Adopt transmission tariff guidelines and introduce of multi-year tariffs by NEPRA;

4. Improve energy efficiency through adoption of National Energy Efficiency and conservation Act and establishing Energy Efficiency and Conservation Authority;

5. Improve the private sector participation in the electricity sector through: (i) merger of Alternative Energy Development Board and Private Power & Infrastructure Board (PPIB); and (ii) approval of new security package for PPIB;

6. Implement corporate restructuring of transmission and distribution of natural gas companies and review the upstream and downstream gas regulations;

7. Establish electricity sector market regulations unit;

8. Increase transparency and access to information in the energy sector and improving public communication policy.

Impact More reliable, sustainable, and secure energy sector that supports the country''s economic growth attained.
Project Outcome
Description of Outcome Reliability, sustainability, and affordability of the energy system improved.
Progress Toward Outcome
Implementation Progress
Description of Project Outputs

Tariffs and subsidies managed

Sector performance and market access for private sector participation improved

Accountability and transparency in the power subsector achieved

Status of Implementation Progress (Outputs, Activities, and Issues)
Geographical Location Nation-wide
Safeguard Categories
Environment C
Involuntary Resettlement C
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design
During Project Implementation
Responsible ADB Officer Inoue, Yuki
Responsible ADB Department Central and West Asia Department
Responsible ADB Division Energy Division, CWRD
Executing Agencies
Ministry of Economic Affairs, Economic Affairs Division
Sajid Hasan
Block Q, Pakistan Secretariat
Islamabad, ICT, Pakistan 44000
Concept Clearance -
Fact Finding 06 Apr 2017 to 11 Apr 2017
MRM 26 Apr 2017
Approval 15 Jun 2017
Last Review Mission -
Last PDS Update 15 Jun 2017

Loan 3537-PAK

Approval Signing Date Effectivity Date Closing
Original Revised Actual
15 Jun 2017 16 Jun 2017 16 Jun 2017 30 Jun 2017 - 30 Jun 2017
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 408.00 Cumulative Contract Awards
ADB 300.00 17 Jun 2022 300.00 0.00 100%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 108.00 17 Jun 2022 300.00 0.00 100%

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