Pakistan’s Electricity Crisis: Who Really Pays the Price?
By T.M. Awan | March 7, 2025
According to a recent report by the International Energy Agency (IEA), electricity prices in Pakistan are now twice as high as in India, China, and the United States—and even costlier than in many European nations. In a country already struggling with economic instability and inflation, the rising electricity prices have added to the financial burden of the masses.
Capacity Payments: The Root Cause of Expensive Electricity
One major reason behind this crisis is the controversial "capacity payment" system, which forces consumers to pay for electricity they never even used. This system benefits private power producers (IPPs) at the expense of ordinary consumers.
For example, if Pakistan’s actual electricity demand is 23,000 MW, but a private power producer claims to have a capacity of 40,000 MW, the government is obligated to pay for the full 40,000 MW output, regardless of actual consumption. This policy has resulted in billions of rupees in payments for unused electricity, further increasing the financial burden on the public.
The Circular Debt Trap: A Never-Ending Burden
The problem doesn’t end there. Despite collecting inflated electricity bills from consumers, the government fails to clear payments to power companies, leading to a massive circular debt crisis that has now crossed PKR 2.5 trillion.
Meanwhile, the IMF continues to pressure Pakistan to reduce this debt. Instead of reforming the system, the government has decided to borrow PKR 1.25 trillion from commercial banks at 10.8% interest—a decision that will only deepen the financial crisis.
A Vicious Cycle of Exploitation
This financial mismanagement has created a cycle of exploitation:
- Unjust Electricity Bills: Consumers are forced to pay inflated bills due to capacity payments.
- Unpaid Dues & Circular Debt: Despite high bills, power producers are undercompensated, fueling a growing debt crisis.
- High-Interest Government Loans: Instead of fixing the system, the government burdens taxpayers with costly loans.
Who Pays the Ultimate Price? The Public!
While ordinary consumers continue to struggle, the profits of politically connected power producers remain untouched. The so-called "experienced leaders" have once again proven that their governance primarily serves their own financial interests, leaving the public to suffer.
This is the harsh reality of Pakistan’s electricity crisis—a manufactured disaster designed to benefit a select few while millions are left struggling to afford basic utilities.
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