Pakistan’s Energy Sector Faces Fiscal Challenges Due to Long-term Contracts with IPPs

َIslamabad:In a recent investigation by *Qudrat News*, it has been revealed that successive governments in Pakistan have entered into long-term contracts with Independent Power Producers (IPPs), leading to significant financial burdens on the national exchequer. The contracts, spanning several decades, require the government to make monthly capacity payments amounting to billions of rupees to these IPPs.

According to the Ministry of Energy, from fiscal year 2013-2014 alone, IPPs received payments totaling PKR 8.344 trillion under capacity payment obligations. This financial year, payments are expected to reach PKR 2.10 trillion. Notably, some contracts extend as far as 2059, ensuring continued substantial payments from the government to these companies through electricity bills borne by consumers.

The investigation highlighted that during the tenure of the Pakistan Muslim League-Nawaz (PML-N) government from 2013 to 2018, the highest number of contracts (130) were signed with electricity generating companies. Under General Pervez Musharraf’s regime, 48 contracts were inked, followed by 35 contracts during the Pakistan Peoples Party’s (PPP) tenure, and 30 contracts under Pakistan Tehreek-e-Insaf (PTI) government.

The Ministry further confirmed that Nepra has signed contracts with IPPs, some of which extend up to 2057, ensuring continuous payments over the next 33 years. Detailed records of these licenses and contracts are available on Nepra’s official website, reflecting the extent and duration of financial commitments the government has made with various power companies.

These revelations shed light on the challenges facing Pakistan’s energy sector, as the country grapples with the economic repercussions of these long-term agreements.