Key takeaways
- Installed capacity was 45,888 MW in June 2024, with utilisation of just 33.88% (NEPRA).
- Circular debt stood at Rs2,393 billion; the IMF projected Rs2,530 billion.
- Distribution losses of 18.31% far exceed the 11.77% NEPRA allows.
- Non-competitive procurement locked in risk premiums long after they were justified.
- Competitive auctions, rules-based PPA restructuring and DISCO accountability are proposed.
In this Minute Mirror column (February 2026), Dr. Ghulam Mohey-ud-din explains the paradox of Pakistan’s power sector: a country with ample generating capacity whose consumers face high bills and outages.
The argument
NEPRA’s State of Industry Report 2024 records 45,888 MW of installed capacity at 30 June 2024, but a utilisation rate of only 33.88 percent. Because capacity payments are due whether plants run or not, consumers effectively pay for two-thirds of the system to sit idle. The shortage is not of power; it is of good contracts and working institutions.
Three failures drive the cost. Procurement was largely non-competitive, embedding risk premiums and financing costs that outlived their original justification. Distribution companies lose 18.31 percent of electricity against 11.77 percent allowed and collect only 92.44 percent of bills; in FY2023-24 losses added about Rs276 billion and under-collection about Rs314.5 billion to circular debt, which reached Rs2,393 billion by June 2024 and was projected by the IMF at Rs2,530 billion, or 2.2 percent of GDP. And the single-buyer market, with transmission bottlenecks, prevents the cheapest plants from being dispatched first.
Repeated tariff adjustments without enforcement mean the debt returns each time, eroding the credibility of every reform package.
What needs to change
- Transparent competitive auctions with standard contracts, along the lines of the UK’s Contracts for Difference.
- A rules-based menu for restructuring legacy agreements: longer terms for lower capacity charges and performance-linked payments.
- Binding service standards for distribution companies.
- Competitive supply selection as the default, as in the Philippines.
- Grid, transmission and procurement planning on a least-cost basis, as Brazil did when scaling renewables.