New Reforms to Boost Industrial Zones and SEZs Across Pakistan

The government has decided to extend the incentives granted to Special Economic Zones (SEZs) under the China-Pakistan Economic Corridor (CPEC) to all industrial estates and zones across the country.

This includes reforms aimed at streamlining electricity supply through a new mechanism approved by the Cabinet Committee on Energy (CCOE).

Under the revised mechanism, the regulatory barrier that prevented power distribution companies (DISCOs) from selling electricity to other licensed suppliers has been removed. This allows DISCOs to enter into bilateral agreements with SEZ developers who hold supplier licenses from the National Electric Power Regulatory Authority (Nepra).

The SEZ Act of 2012 mandates that both federal and provincial governments provide utilities, including electricity, to SEZs. However, challenges such as unreliable power supply, delays in infrastructure development, and regulatory uncertainties have hindered the full potential of SEZs.

After discussions with Chinese counterparts, it was agreed that CPEC SEZs would remain under the service jurisdiction of their respective DISCOs. Developers will sign operation and maintenance (O&M) agreements with DISCOs to manage infrastructure, electricity supply, billing, and collections without needing additional licenses.

Industrial consumers in SEZs will be charged a uniform tariff, and developers will receive an O&M fee approved by Nepra. CPEC SEZs will also sign power purchase agreements with DISCOs for electricity supply equivalent to their peak demand for five years.

Nepra’s recent regulatory changes now allow host DISCOs to sell electricity to SEZ developers through bilateral contracts. SEZs will apply for supplier of last resort and distribution licenses under the Nepra Act of 1997 for power procurement and infrastructure development.

The Ministry of Industries and Production proposed extending the incentive package to all SEZs to avoid disparities between CPEC and non-CPEC zones. The CCOE approved this, ensuring uniform benefits for industrial consumers across the country.

The revised mechanism aims to minimize the role of DISCOs in SEZs and industrial zones, introduce one-window facilities to address billing complaints, and reduce distribution costs. The revenue from electricity sales will be transferred to the Central Power Purchasing Agency-Guarantee (CPPA-G) through escrow accounts, after deducting distribution margins approved by Nepra.

Comprehensive O&M agreements have been developed by the Power Division to implement the changes. The energy committee stressed that the revised system would enhance efficiency, ensure fair distribution of resources, and create a consistent framework for industrial development nationwide.