We often do the opposite of what drives progress in developed nations. While wise nations protect, promote, respect, and honor their heroes, we have a history of persecuting them. Figures like Zulfiqar Ali Bhutto, Benazir Bhutto, and Liaquat Ali Khan were assassinated, while others like Dr. Abdul Qadeer Khan and Imran Khan were imprisoned. We even go so far as to question the very foundations of our nation, doubting the Two-Nation Theory and casting aspersions on the creation of Pakistan as a separate country.
Wise nations respect their benefactors and those who assist them in difficult times. For example, Sri Lanka deeply respects Pakistan for its crucial help in eliminating terrorism when no other nation stepped forward. In contrast, we as a nation are increasingly inclined to malign and disrespect the very companies and countries that helped us emerge from darkness caused by shortsighted, low-quality policies and the vested interests of our self-imposed leaders.
These Independent Power Producers (IPPs) came to our rescue when the entire country was plunged into darkness, leaving households powerless, industries and businesses shutting down, and schools, universities, and hospitals in obscurity. The country was mired in a deep financial and economic crisis, unable to pay its debts or invest in the electricity sector. Our political leaders, with begging bowls in hand, sought investment from other nations, but no one was willing to invest a penny in Pakistan’s energy sector.
Given our tarnished record of dishonoring agreements, dragging companies to court, frequently breaching contracts, demanding kickbacks and favors, delaying processes, and failing to make agreed-upon payments, it was no wonder that foreign investors were hesitant. Our dilapidated infrastructure and poor law and order situation had caused nightmares for potential investors. Even domestic investors were forced to shift their investments to more stable countries due to these precarious circumstances.
At a crucial moment when most countries and private sectors had abandoned Pakistan as an investment destination, China, viewing Pakistan as an “iron brother” with deep affection, stepped in to help alleviate the darkness that had engulfed the nation. China’s investments of over $ 33 Billion spanned various sectors, including coal-fired power plants like Sahiwal and Port Qasim, renewable energy projects such as the Quaid-e-Azam Solar Park, hydropower initiatives like Karot and Kohala dams, and nuclear facilities like the Chashma Nuclear Power Plant. Additionally, China invested in upgrading Pakistan’s transmission infrastructure, significantly boosting power generation capacity, addressing energy shortages, and improving distribution efficiency.
These projects have provided a reliable, sustained energy backbone for Pakistan. This investment has been pivotal in alleviating chronic energy shortages, reducing load shedding, and enabling industries to operate more efficiently, which has spurred economic growth and job creation. The involvement of Chinese companies has also facilitated technological transfer and modernization, enhancing the efficiency and reliability of Pakistan’s energy sector. Moreover, the minimal difference between the capacity and actual electricity produced by Chinese IPPs contrasts sharply with the significant gap observed in non-Chinese IPPs.
As per the NEPRA report for FY 2022-23, Chinese Independent Power Producers (IPPs), particularly coal-based plants like China Power Hub and Sahiwal, exhibited higher efficiency compared to non-Chinese IPPs. Chinese IPPs achieved net capacity factors ranging from 26.4% to 69.7% and net output factors between 72.3% and 91.2%, reflecting better utilization and operational stability. In contrast, non-Chinese IPPs, especially those relying on imported fuels like RFO and RLNG, showed lower efficiency, with net capacity factors as low as 0.3% and net output factors around 5.2%.
Given the high efficiency and productivity, Chinese IPPs have the right to receive payments as per the agreements, ensuring they remain financially viable and can cover operational costs, overheads, and fuel expenses. Without timely payments, these companies may be forced to halt operations, which could lead to accumulating capacity payments without any actual electricity generation. This would not only strain Pakistan’s energy supply but also increase financial burdens due to the continued obligation to pay for idle capacity under the existing agreements.
Interestingly, as of FY 2022-23, Pakistan’s total installed electricity generation capacity was 42,931.835 MW against actual consumption of 13,751 MW, representing approximately 32% of the total installed capacity of 42,931.835 MW. This means that the country paid for nearly 68% of unused electricity which reached billions of dollars over the years.
Having said all this, a billion-dollar question remained unanswered: Why did Pakistan’s policymakers choose to install IPPs with double the capacity needed, while developed countries like the USA, Germany, and China maintain only a 20% reserve capacity. This decision appears to stem from a short-sighted vision, plagued by sluggish and inefficient decision-making processes. Furthermore, inherent dishonesty and vested interests have often placed personal gains over national interests, leading to decisions that prioritize immediate benefits rather than long-term sustainability for the country.
It is high time that our political leadership clearly distinguish those power plants which are producing almost negligible electricity but enjoying the payment based upon capacity and those that are producing electricity as par with their capacity payment.
This is high time that our analysts, anchorpersons and civil society should change gear and be thankful to IPPs. We should admit our own mistakes and hold all those accountable who made imprudent decisions. Instead of advocating breaching agreements and pursuing legal action against IPPs, they should urge the government to engage with them respectfully, acknowledging their role in alleviating energy crises.
Moreover, the government should take decisive action to mitigate circular debt in the energy sector. Pakistan should introduce a performance-based payment system, prioritizing performance based payment systems. Besides, revising tariff structures to reflect the true cost of electricity, investing in energy efficiency through grid modernization, and enhancing governance to prevent corruption and mismanagement are crucial steps. These measures would reduce financial leakages and ensure a more sustainable and efficient energy sector.
