FROM March through April and into the present moment, Islamabad handled the Iran–US crisis with notable strategic discipline.
Back channels remained active, neutrality was preserved across ports and airspace and energy flows were not disrupted. There were no sanctions, no escalation, no missteps. For a country often pulled into the gravitational field of other people’s conflicts, this was a clear demonstration of statecraft. Public approval reflected that success, with more than 70 percent backing the government’s approach. Yet overall approval has sunk to 29 percent. The explanation lies not in foreign policy but in something far more immediate and unforgiving, the electricity bill.
Between June and December 2026, over 60 percent of Pakistan’s legacy Independent Power Producer contracts will expire. These agreements, largely originating from the 1994 and 2002 policy frameworks, account for around 7,800 megawatts of installed capacity. They are built on take-or-pay clauses and dollar-indexed capacity payments that guarantee returns regardless of actual generation. For decades, reform plans have pointed to a single solution, allow these contracts to lapse, retire expensive plants and shift to cheaper domestic power. That moment is now less than a year away, yet there is no clear public roadmap. The official position remains under review. Meanwhile, industrial consumers are preparing for the worst, budgeting for diesel-based generation in anticipation of shortages or costly last-minute extensions.
The problem is structural. The expiring plants rely heavily on imported fuels. Around 42 percent run on imported RLNG, 35 percent on furnace oil and 11 percent on imported coal. Last year alone, Pakistan spent $18.7 billion on fuel imports for power generation. These costs flow directly into consumer tariffs through monthly adjustments. When the rupee weakens, electricity becomes more expensive. Extending these contracts would not just delay reform, it would lock in import dependence for years. What looks like a utility issue is in fact a balance-of-payments risk. This should have been the moment for rooftop solar. The economics are straightforward. Solar eliminates fuel imports, reduces transmission losses, and avoids capacity payments. A modest 5kW system can offset about 600 units a month, turning households into small producers while saving foreign exchange.
Instead, policy has moved in the opposite direction. Net-metering buyback rates for new users have been cut to Rs 11.33 per unit, while consumers pay over Rs 45. Duties on panels and inverters were reintroduced, raising system costs significantly. Distribution companies have imposed caps on new connections and approval delays now stretch for months. The result is predictable, installations have dropped sharply, with industry data showing a 41 percent decline in early 2026. The signal is clear, remain dependent on the grid.
The contrast is striking. In managing an external crisis, the state showed clarity and control. In handling the domestic energy challenge, it has shown hesitation. Public perception has settled around three points. First, the system appears to protect import-based generation while exposing consumers to rising costs. Extending dollar-linked contracts while discouraging solar reinforces the status quo. Second, policy inconsistency has become a financial burden. Households that invested heavily in solar under one framework now face changing rules, damaging trust. Third, the absence of a clear post-2026 plan is itself a message. People assume continuity, meaning more circular debt and future surcharges. Recent surveys show that nearly 70 percent of Pakistanis rank electricity and inflation as their top concern, while external security barely registers.
Reversing this trend requires a shift in who the state partners with. Continuing with legacy IPPs sustains the current model. Engaging households and businesses as energy producers offers an alternative. The policy steps are straightforward. Allow expensive plants to retire on schedule. Replace centralized expansion with decentralized net-metering frameworks that treat rooftop solar as part of the grid. Set a predictable buyback rate linked to the consumer tariff and guarantee it for several years to restore confidence. Remove caps and enforce fast approval timelines. Eliminate taxes on solar equipment, recognizing that one-time imports of hardware reduce long-term fuel imports. Most importantly, avoid future contracts that pass fuel costs directly to consumers.
The choice is clear. One path extends old contracts, continues fuel imports, and relies on tariff increases to cover the gap. This protects a narrow group while burdening the wider population. The other path decentralizes power generation, reduces imports, and stabilizes costs over time. It involves short-term adjustment but offers long-term relief. The state has already shown it can manage external pressure. The real test now lies at home. Energy policy sits at the intersection of economic stability and public trust. As the focus shifts inward, performance will be judged not by diplomacy but by electricity bills. One challenge has been handled with competence. The other is unfolding quietly in every household. The outcome will depend not on strategy abroad but on decisions measured in units of electricity and the cost of imports. The tools exist. The question is whether they will be used.
—The writer is former Regional Executive Inclusive Development at NBP, Mirpur AK.
