Pakistan’s energy sector is in a peculiar mess. On paper, the electricity supply is sufficient at a lower energy cost compared to the past. However, the total power purchase price has become unaffordable. Demand is falling due to price increases, and even with constrained demand, the actual supply is insufficient to provide power across the board.

Lately, frustration has been directed at Chinese investors, while the core problems are the overly generous sovereign contracts made by successive governments, inadequate transmission and holistic planning, and poor governance. Pakistani authorities perhaps do not consider the long-term implications when making international contracts. The shortcomings could be due to incompetence, corruption, or both. Numerous examples illustrate this issue, such as the mining contract in Reko Diq, rental power plants, the Iran-Pakistan pipeline, Independent Power Producers (IPPs) during different tenures, and long-term RLNG contracts.

We sign these contracts and later realize they are not in the country’s best interest, then criticize them in the media. Sometimes courts intervene, and in other cases, the government attempts to renegotiate. In some instances, negotiations succeed, while in others, we face international arbitration.

The latest obsession concerns Chinese IPPs. There is no doubt that the growing capacity payments on IPP debt (where Chinese financial institutions have the lion’s share) are unsustainable. BR Research has been the biggest critic of having too many power plants under very little time and has been forewarning about........

© Business Recorder