THE recent disclosure by former Federal Minister Gohar Ejaz has brought to light the staggering financial burden Pakistani consumers face due to the country’s energy sector mismanagement. The fact sheet reveals that Rs1.93 trillion was paid in capacity payments to Independent Power Producers (IPPs) in the last fiscal year. This includes Rs 46 billion to two IPPs that generated zero power and Rs 370 billion to three plants operating at a mere 15 percent load factor. These revelations beg the critical question: Why are government authorities not taking decisive action to address this issue?
At the core of this crisis lies the deeply entrenched system of capacity payments. These payments, made regardless of the actual electricity produced, have led to situations where the government procures electricity at astronomical rates—up to Rs 750 per unit from one plant and Rs 200 per unit from coal power plants. Such inefficiencies and mismanagement not only drain public finances but also inflate the cost of electricity for consumers, currently standing at Rs60 per unit.
One can not ignore the influence of powerful stakeholders in this sector. The fact that a significant portion of the IPPs is owned by only 40 families and groups within Pakistan suggests a concentration of power and influence that can stymie reform efforts. These stakeholders have vested interests in maintaining the status quo, benefitting from lucrative contracts that guarantee them payments irrespective of their operational efficiency.
Corruption and lack of accountability further complicate the situation. Contracts with IPPs have been criticized for being excessively favourable to the producers at the expense of the consumers and the government. The opaque nature of these agreements, coupled with a lack of stringent oversight, allows for continued exploitation. Despite repeated promises of reform and transparency, little has changed, raising questions about the commitment of government authorities to tackle these deep-seated issues.
Ejaz’s call for treating all IPPs as merchant plants—where payments are made only for the electricity supplied presents a viable solution to curb unnecessary expenditures. However, implementing such a policy overhaul requires political will and a readiness to confront powerful interest groups. Unfortunately, past attempts at reform have often been met with resistance, leading to a cycle of inaction and continued financial strain on the national exchequer.
A social media campaign has recently gained momentum, with citizens and activists rallying behind Gohar Ejaz’s revelations and demanding accountability. The campaign highlights the urgent need for transparency and reform in the energy sector, urging the government to take immediate action to protect consumers and the economy.
Regulatory bodies, tasked with overseeing the energy sector, must play a proactive role in this transformation. Their failure to enforce accountability and transparency has perpetuated inefficiencies. Strengthening these institutions, ensuring their independence, and empowering them to act against malpractices are essential steps toward resolving the crisis.
Ultimately, sustained public pressure and advocacy are crucial in compelling government authorities to act. Civil society organizations, media, and consumers must unite to demand greater transparency, accountability, and a complete overhaul of the current system. Highlighting the human cost of high electricity prices impacting households, businesses, and the overall economy can galvanize broader support for change.
The current state of Pakistan’s energy sector, as revealed by Gohar Ejaz, is a testament to systemic failures and the undue influence of powerful stakeholders. The government’s inaction in addressing the exorbitant capacity payments and inefficient contracts not only exacerbates the financial burden on consumers but also hampers economic growth. It is imperative for authorities to demonstrate political will, implement comprehensive reforms, and prioritize the interests of the public over entrenched private interests. Only through decisive action can Pakistan hope to alleviate the strain on its energy sector and ensure a fair and sustainable future for its citizens.
—The writer is former Regional Executive Inclusive Development at NBP, Mirpur AK.
