Pakistan’s energy sector has long been a key contributor to economic growth, but chronic inefficiencies, high costs, and frequent load-shedding continue to undermine it. At the center of this crisis are Independent Power Producers (IPPs) operating under Power Purchase Agreements (PPAs) that guarantee high returns indexed to the US dollar—leading to ballooning capacity payments and a combined gas-power circular debt exceeding Rs 5 trillion.
Drawing on international best practices—South Africa’s PPA renegotiation model, Denmark’s community ownership of renewables, and India’s UDAY scheme for distribution reform—this article argues that Pakistan must pursue a holistic strategy: renegotiate IPP contracts, improve distribution efficiency, diversify the energy mix, restructure financial obligations, and strengthen regulatory oversight through NEPRA. Seventeen IPPs have already reached a hybrid ‘take and pay’ agreement, signaling political will for reform.
Read the full article on Business Recorder (Published 19 December 2024).