The 18th Constitutional Amendment Transferred many Subjects, including Aspects of Energy, to the Provinces. Examine how this Devolution has Complicated Energy Governance in Pakistan and what Inter-provincial Coordination Mechanisms are Needed to Address the Resulting Fragmentation.

CSS/PMS Political Science | 18th Constitutional Amendment Transferred many Subjects, including Aspects of Energy, to the Provinces

The 18th Constitutional Amendment devolved key energy subjects to the provinces, and investment deadlocks between federal and provincial authorities over resource ownership and pricing; therefore, strengthening inter-provincial coordination mechanisms is essential to resolve this institutional crisis and remains an important topic in CSS Cureent Affairs.

Outline

Introduction
Constitutional & Conceptual Mapping of Post-Devolution Energy Governance

Article 157 (Electricity Mandate)
Article 172(3) (Joint Resource Ownership)
Federal Legislative List (FLL) Part II
Article 158 (Natural Gas Priority)

How Devolution Has Complicated Energy Governance?

Structural Fracture in Generation Planning
Evidence: Due to capacity payment traps, the power sector circular debt in Pakistan has jumped to PKR 2.6 trillion as uncoordinated provincial capacities are being added continuously.
Legislative Asymmetry and Tariff Determination Disputes
Evidence: Private sector wheeling projects (direct B2B electricity sales) have been paralyzed due to multiple delays in licensing of provincial transmission lines (PTL).
Environmental Approvals and Project Delays
Evidence: For instance, misaligned environmental clearance and right-of-way protocols between Khyber Pakhtunkhwa (KP) and Punjab caused major delays in the construction of the 765 kV Dasu-to-Islamabad transmission line
Natural Gas Allocation Grievances under Article 158
Evidence: Annual gas load shedding in winter causes legal disputes, with Sindh frequently refusing gas diversion to Sui Northern Gas Pipelines Limited (SNGPL) networks to textile mills in Punjab.

Institutional and Structural Impact of the Complications

The Structural Limitations of the Council of Common Interests (CCI)
Evidence: Multi-year deadlocks in the CCI over renewable energy quotas delayed the approval of the National Electricity Policy.
Bureaucratic Red Tape in Trans-Provincial Corridors
Evidence: The North-South (Gas) Pipeline project (renamed Pakistan Stream Gas Pipeline) has been languishing for years because of differences between the federal and provincial governments regarding land acquisition taxes and pipeline routes.
Lack of Judicial Specialization
Evidence: Dozens of wind and solar IPPs went through years of litigation in the High Courts regarding retroactive tariff changes and curtailment penalties.
Inter-Institutional Data Deficits
Evidence: The provincial energy departments often declare off-grid solarisation programs that run contrary to the national load forecasting and grid stability projections of the NTDC.

Necessary Inter-Provincial Coordination Mechanisms to Address Fragmentation

Revitalizing and Institutionalizing the Council of Common Interests (CCI)
Creating a Co-Drafted, Inclusive IGCEP Framework
Harmonizing Provincial and Federal Regulators
Transitioning toward Regional Transmission and Open Wholesale Markets

Critical analysis
Conclusion

Introduction

The 18th Constitutional amendment was designed to eliminate the problems of hyper-centralization by devoting more powers at the provincial level; it inadvertently broke the nervous system of the country’s most important economic engine – the energy sector. Undoubtedly, the constitutional amendment devolved various powers, without providing a coordinated regulatory mechanism, which made energy governance a constitutional tug of war between the federal government and local governments. The power sector circular debt has reached PKR 2.6 trillion and is increasingly driven by the capacity payment traps created by the lack of coordination in generation planning. Private sector wheeling projects are paralyzed, and many infrastructure projects are delayed for more than a year, including the Pakistan Stream Gas Pipeline. A comprehensive understanding of the intertwined legal and structural elements, the electricity requirements of Article 157, joint resource ownership in Article 172(3), shared jurisdiction of the Federal Legislative List (FLL) Part II, and the natural gas priorities of Article 158 – is needed to navigate this crisis. Moreover, strong inter-provincial coordination mechanisms are needed to address the resulting gridlocks, such as the structural constraints of the Council of Common Interests (CCI), the administrators’ burden of the trans-provincial corridors, and data deficits with the National Transmission & Despatch Company (NTDC), as well as a shift toward open wholesale markets in the regions. In the end, if Pakistan fails to transform its post-devolution governance from competitive regionalism to collaborative federalism, the structural tensions in its energy system will persist and create further challenges for maintaining grid stability and economic growth.

Constitutional & Conceptual Mapping of Post-Devolution Energy Governance

Article 157 (Power Mandate)

The 18th Constitutional Amendment has completely changed the landscape of Pakistan’s power sector by granting significant autonomy to the federal units over energy resources under Article 157. The constitution makes it clear that provinces have the authority to construct power houses, to install internal transmission lines, and to tax electricity consumption. This decentralized authority is, however, in direct opposition to the reality of the central grid, as provinces have the tendency to implement their own power generation programs without coordinating with the technical aspects or transmission capacity of the central grid. Consequently, this legal rule establishes an institutional tug-of-war, which converts a good intention of increasing local autonomy into a system of gridlock and uncoordinated national planning.

Article 172(3) Joint Ownership of Resources

Article 172(3) actually made the definition of ownership of the natural resources of Pakistan more complex and established that mineral oil and natural gas are shared by the provincial and federal government on a joint and equal basis. This 50:50 joint ownership scheme gave the federal government a new lease of life by taking away its traditional unilateral control of exploration upstream, and it now makes it legally necessary for the provincial government to give its consent to any new concession blocks or corporate leases. This measure was able to resolve long-standing provincial concerns about resource exploitation, but it caused a great deal of bureaucratic delay in the upstream oil and gas sector. The joint control has never been clearly laid down and regulated in terms of procedures for its operation, which means that international oil companies are constantly subject to delays, making it difficult to explore resources throughout the country.

Federal Legislative List (FLL) Part II

To balance the new powers transferred, the Federal Legislative List (FLL) Part II assigns the general subjects of electricity, legal framework, and major regulatory institutions to the joint supervision of the Council of Common Interests (CCI). Both government levels have an equal vote in this joint forum, enabling energy policies to be made at the national level, but not just by the federal capital. But as energy governance shifted to FLL Part II, highly technical planning questions have become a zero-sum political game. Energy infrastructure management is constantly plagued by political chaos, as there is no neutral, permanent, technical body to solve day-to-day operational issues.

Subsection 58 of Article 15 (Natural Gas Priority)

Article 158 is about regional equity and provides the constitutional right of first refusal to the province in which the natural gas well is physically found. This provision clearly states that a province that generates gas in the province must first satisfy its natural gas supply for domestic, commercial, and industrial use before it can be shipped interprovincially. This helps the rich regions to resist exploitation, but causes great economic imbalance in the entire federation in times of a shortage of fuel. The provision provides that the region has priority over national economic reform, therefore, prohibiting the movement of high-cost industrial centres away from cheap fuel, and entrusting the region to the end of an endless series of energy litigation.

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How Devolution Has Complicated Energy Governance?

Structural Fracture in Generation Planning

The disintegration of the capacity planning process into a long-term structural fracture has resulted from the uncoordinated growth of parallel power portfolios held by the federal and provincial governments. For example, as uncoordinated capacities are being added to the role of the provinces, the staggering circular debt of the power sector has increased to PKR 2.6 trillion, mainly because of capacity payment traps where state utilities have to pay private power generation assets for capacity even if they are not used. This is a compounding financial crisis because power plants are approved on a localized basis to satisfy the political agenda of the provinces, without taking into consideration national demand. Consequently, the central government’s central power buyer becomes legally responsible for paying for a huge amount of unused electricity, putting the energy chain out of business.

Legislative Asymmetry and Tariff Determination Disputes

The federal regulatory framework and provincial energy legislation have created a significant disconnect in each province, hampering the market-opening efforts around the country. In particular, the private sector whaling projects, which enable direct business-to-business (B2B) electricity transactions, have languished and suffered several delays in licensing the provincial transmission lines (PTLs). The paralysis is due to a prolonged jurisdictional dispute between NEPRA and provincial energy departments on which body has the final say in determining whaling fees and charges for the use of the grid. The different state agencies are unable to agree on a common set of guidelines for regulation, leaving private developers in a state of limbo and blocking billions of rupees of potential corporate investment in renewable energy.

Environmental Approvals and Project Delays

Inadequate coordination and the complete devolution of oversight over the environment to the provinces have led to a disjointed regulatory regime, which has a significant negative impact on the pace of trans-provincial infrastructure development. For instance, misaligned environmental clearance and right-of-way protocols between Khyber Pakhtunkhwa (KP) and Punjab caused major delays in the construction of the 765 kV Dasu-to-Islamabad transmission line. This ultra-high-voltage power line for clean energy was traversing the provincial administrative boundary, leading it to be caught up in a snag between various provincial environmental protection agencies and district land revenue departments. The provincial units used different criteria for setting thresholds for environmental impacts, calculating crop damage, and calculating compensation for the land erected to towers. These mismatches in provincial mandates directly led to expensive construction delays, with the national exchequer paying large idle capacity penalties for unused generation.

Natural Gas Allocation Grievances under Article 158

The rigid interpretation of Article 158 has created a major economic disagreement between the provinces, particularly in terms of winter fuel management. Gas load shedding happens on an annual basis during winter, resulting in serious legal tussles, especially in Sindh, where the government often refuses to allow Sui Northern Gas Pipelines Limited (SNGPL) to divert gas for supplying textile mills in Punjab. With this constitutional principle in mind, Sindh puts local consumers first and refuses to allow the federal center to strike a balance in the national energy network. This resource locking is a problem within the country, as multi-billion-dollar export-based industries operating in Punjab are denied fuel during critical times of production and manufacturing, which clearly shows how a lack of coordination in resource priority actively hurts the economic growth of the country.

Institutional and Structural Impact of the Complications

The Structural Limitations of the Council of Common Interests (CCI)

The Council of Common Interests is constitutionally mandated to resolve federal-provincial energy gridlocks, but it is ill-equipped, structurally, to deal with ongoing and complex regulatory issues. For instance, the National Electricity Policy for renewable energy had languished for a long time due to a multi-year deadlock in the CCI. The council meets as a political forum and not an administrative body, so that technical discussions around wind and solar allocations are easily broken down regionally along political lines. This structural constraint is not conducive to the timely resolution of policy disagreements, resulting in the loss of international clean energy developers due to the massive uncertainty created by the regulatory process.

Bureaucratic Red Tape in Trans-Provincial Corridors

Linear projects that are constructed across multiple provinces are subject to multiple levels of provincial taxation and provincial land use laws that conflict. One of the major projects that has been languishing for years is the North-South Gas Pipeline project (NSGP), which has been stalled owing to the land acquisition tax dispute between federal and provincial governments, as well as different pipeline routes. The project is stuck in seemingly endless inter-governmental negotiations, as each province has its own independent authority to impose localized infrastructure charges and determine environmental flows. The very heavy red tape adds to transaction costs and deprives the nation of essential pipeline facilities to transport LNG imports overland.

Lack of Judicial Specialization

The lack of specialized administrative tribunals or energy courts has meant that the highly technical nature of utility disputes has been brought into the ordinary High Courts in the provinces. So decades of litigation in the High Courts followed, involving dozens of wind and solar IPPs against changes to tariffs and curtailment penalties that were imposed retroactively. These complicated corporate cases often languish in court for years as members of the ordinary judiciary are not energy economists or financial modelers, or even a grid engineer. The lack of specialization in courts is not only a major hurdle for timely legal relief to project developers, but also a blow to the state’s credibility and increases the sovereign risk premium on all future investments in energy.

Inter-Institutional Data Deficits

Lack of organized data exchange between both federal utility planners and provincial energy boards has resulted in significant data gaps in national demand forecasting. As a clear trend, provincial energy departments often declare off-grid solarisation programs that run contrary to the national load forecasting and grid stability projections of the NTDC. These localized solar schemes are carried out independently, so predictions of changes in grid demand by central planners are not accurate. This acute data shortage leads to very high over-supply forecasts at the national level, which makes the central grid very unstable and intensifies the problem of low utilization of centralized base-load power facilities.

Necessary Inter-Provincial Coordination Mechanisms to Address Fragmentation

Revitalizing and Institutionalizing the Council of Common Interests (CCI)

To become a true governance body, the CCI needs to have a permanent, technically competent secretariat. Such a secretariat should be operated by non-partisan energy economists, lawyers, and electrical engineers, but not by career bureaucrats. This body can work around the clock to achieve objectivity and a mediation based on data and facts in technical conflicts over resource tariffs, transmission rights-of-way, and environmental rules, preventing them from escalating to a political crisis. The institutionalization in this way helps to ensure that technical decisions are taken on an economic merits basis, not as a result of the political bargaining that could take place in different regions.

Creating a Co-Drafted, Inclusive IGCEP Framework

The IGCEP needs to be reworked to be truly co-developed, a national blueprint, not a federal directive. A structural position should be accorded to the provincial energy directorates during the early modeling stages under centralized management of the NTDC. The new framework will directly incorporate provincial growth targets, localized renewable quotas, and regional off-grid solarization data into the country-wide power planning algorithm, ensuring power planning is done in line with the actual demand in the country. Such an inclusive approach is crucial to stop uncoordinated power expansion and the accumulation of further circular debt.

Harmonizing Provincial and Federal Regulators

Pakistan needs to set up a permanent joint committee to help NEPRA and provincial energy departments coordinate their work. Currently, overlapping rules and jurisdictions make things difficult for everyone involved. By standardizing grid codes and creating clear, unified rules for licensing and tariffs on provincial transmission lines, the government can give private developers a more predictable environment. This kind of coordination is the only way to get stalled B2B power deals moving and encourage more private investment in clean energy infrastructure.

Transitioning toward Regional Transmission and Open Wholesale Markets

To fix the long-term issues with energy fragmentation, it is necessary to move away from the state-monopoly system, where there is only one buyer, and start building a competitive wholesale market instead. Our organization has the capability to do this by fully putting the CTBCM framework into practice and setting up independent regional operators to handle transmission. When private buyers and sellers can trade power directly, electricity is moved based on what makes sense economically rather than being restricted by administrative borders. An open market lets prices be set by transparent forces, which helps take the politics out of how national resources are shared.

Critical analysis

Critically, the energy crisis in Pakistan is not really the fault of the 18th Amendment. The actual problem is that the country never set up the institutional systems required to make a decentralized government function properly. Power was moved to the provinces, but the technical and administrative connections needed to link them with the federal government were never created. This has resulted in a broken setup where provinces have the power to approve new energy projects, yet the federal government is still stuck with the financial responsibility and the mounting debt. As a result, energy policy has become a political battleground. Provinces use constitutional rules to look out for their own regional interests, while the federal center uses its control over the power grid and pricing to protect its own finances. This constant friction creates a lot of uncertainty, which makes it hard to attract long-term international investment. Solving this does not mean taking away provincial power. Instead, it requires a cooperative approach where both levels of government work together using shared data, consistent regulations, and a system driven by the market.

Conclusion

In short, the 18th Amendment was intended to give provinces more control over energy, but because there was no real way for everyone to work together, the sector has become very disorganized. This lack of coordination has led to poor planning, disputes over natural gas, and stalled business projects, which eventually pushed the power sector debt to a massive 2.6 trillion PKR. It is now clear that managing a modern energy system in a country like Pakistan cannot work if provinces act entirely on their own or if the federal government tries to force its own rules without cooperation. In fact, Pakistan wants a secure energy future, it has to move past political arguments and focus on working together. This means giving the Council of Common Interests a permanent technical team to help with decisions, creating national energy plans that everyone agrees on, and making sure all regulations match up. The goal should be to create a competitive electricity market where decisions are based on economic facts rather than administrative borders. Therefore, moving toward shared data and uniform rules is the only way to build an energy sector that actually works and lasts.

References

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