The government plans to require Special Economic Zones (SEZs) to sign Power Purchase Agency Agreements (PPAAs) with power Distribution Companies (Discos) to secure electricity supply equivalent to peak demand for five years.
According to a news report, the proposal will be approved in an upcoming Cabinet Committee on Energy (CCoE) meeting, chaired by Prime Minister Shehbaz Sharif.
Under the SEZ Act of 2012, federal and provincial governments are responsible for ensuring that utilities like electricity and gas are provided to SEZs. Despite this mandate, SEZs face challenges including unreliable electricity supply, delays in developing distribution infrastructure, and legal ambiguities about power supply arrangements. These issues have impeded the industrial growth envisioned under the SEZ framework.
To address these problems, the government has discussed a new model with stakeholders, including Chinese counterparts. According to sources, SEZ developers will sign agreements with Discos for infrastructure operation and maintenance, uniform tariff billing, and revenue collection. CPEC SEZs will also apply for supplier-of-last-resort licenses from NEPRA to ensure uninterrupted power supply within their premises.
NEPRA recently proposed amendments to its licensing regulations to allow Discos to sell electricity to zone developers under bilateral contracts.
Additionally, the Central Power Purchasing Agency (CPPA-G) will charge uniform industrial tariffs for electricity supplied to SEZs and will receive revenue collected by SEZs after deducting approved distribution margins.
The Power Division has submitted several proposals to the CCoE, including extending the five-year PPAAs, requiring SEZs to obtain necessary licenses from NEPRA, and mandating procurement of additional power under NEPRA-approved regulations. Ministries and entities, including NEPRA, the Board of Investment (BoI), and the Planning Division, have largely supported the proposals.
However, the Ministry of Commerce and the Ministry of Industries have emphasized expanding these arrangements to all SEZs, not just those under the China-Pakistan Economic Corridor (CPEC), to ensure uniformity and avoid discrepancies. The proposal is expected to streamline the electricity supply process for SEZs, bolstering industrial activity and attracting investment.
