🔲 Public Investigative Series | Episode 27Subject: ...

🔲 Public Investigative Series | Episode 27

Subject: How Can Pakistan Fix Its Electricity System?

[An Open Letter to the Federal Minister for Energy, Power Division]

🔺 When institutions avoid providing facts, it becomes the responsibility of the public to pursue the truth.

Written and researched by: Syed Shayan

Mr. Awais Ahmad Khan Leghari

Federal Minister for Energy, Power Division

Islamabad

Assalamualaikum,

On 11 May 2026, the LUMS Energy Institute, in collaboration with the Ministry of Energy Power Division, organised a training workshop for journalists on the core structural issues facing Pakistan’s power sector. During the workshop, you addressed participants via video link and made the following nine major claims, or statements carrying substantially the same meaning, regarding Pakistan’s power policy and the future direction of the energy sector:

1. The government has permanently buried the IPP system that had kept Pakistan’s economy trapped for decades.

2. Electricity will eventually become so inexpensive that consumers will be able to store power in batteries during the day and use it at night. The government, according to your statement, will encourage Battery Energy Storage Systems for this purpose.

3. The government is moving away from the existing electricity procurement structure and the traditional IPP business model.

4. Private companies will be allowed to introduce smart meters in order to reduce billing complications and financial burdens on consumers.

5. Electricity tariffs for industry and agriculture will be reduced significantly.

6. The government has halted plans for an additional 10000 megawatts of IPPs, and no new imported fuel based IPPs will be established going forward.

7. Within the next one to two years, several state owned electricity distribution companies will be handed over to the private sector.

8. Faulty electricity meters are a major source of billing disputes. Therefore, the government is ensuring that no defective meter remains operational for more than three months so that consumers are not subjected to unnecessary financial burdens.

9. The ongoing renegotiation process with IPPs will save the public and the national exchequer approximately PKR 3.5 trillion over the next 10 to 15 years.

Mr. Minister,

What is truly astonishing is the level of contradiction embedded within these nine claims and the policy direction implied by them. These contradictions are not merely disrupting the continuity and coherence of government policy, they have pushed the entire nation into a state of intellectual confusion and uncertainty.

At one moment, your speech presents the dismantling of the IPP regime as a historic breakthrough. At another, the same outdated structure appears to be preserved under new terminology and revised narratives.

Your address reflects a deeper reality: that your entire policy team appears trapped in ambiguity and conceptual disorder, while the Ministry itself seems increasingly unable to maintain a consistent direction in its energy policy framework.

After carefully examining these contradictions, our think tank concluded that these nine claims warranted nine direct and straightforward questions.

These questions are not being raised for political point scoring. They are being asked on behalf of millions of Pakistani consumers who have spent years carrying the burden of expensive electricity, flawed policy decisions, Capacity Payments, circular debt, and repeated administrative failures.

If the government has truly achieved the historic reforms it claims to have delivered in Pakistan’s electricity sector, then there should be no obstacle in providing clear, documented, and unambiguous answers to these questions.

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Question No. 1: Has the IPP System Truly Been “Buried”?

Mr. Minister,

You have categorically stated that the IPP system has been “buried” once and for all. However, empirical realities on the ground present a starkly different picture.

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Contractual Sustainability: From a technical and legal standpoint, this claim is unsustainable. Pakistan’s power sector continues to operate under long term Power Purchase Agreements (PPAs), which possess internationally recognized and contractually protected legal standing.

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The Capacity Payment Paradox: Even if your premise is accepted, that the legacy system is abolished and prior agreements terminated, the public deserves an explicit explanation as to why Capacity Payments continue to burden monthly electricity bills. Please state clearly: have net payments to these generation companies genuinely been reduced to zero?

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Restructuring vs. Elimination: The nation requires clarity on whether your Ministry has systematically dismantled the IPP framework, or if a localized restructuring of select contracts is merely being repackaged as the demise of the entire system.

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Evidentiary Accountability: We urge the Ministry to place all official notifications, legal instruments, and documentary evidence regarding this claimed “burial” before the public. This is critical to verifying whether the IPP regime, which has financially drained the national exchequer and consumers for nearly a quarter of a century, has genuinely reached its end.

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Question No. 2: Is Electricity Becoming “Inexpensive,” or is Expensive Battery Storage Justified?

Mr. Minister,

Your statement is on the public record: in the near future, grid electricity will become so cheap that citizens will merely charge batteries during the day for nighttime consumption.

From the perspective of Energy Economics, this assertion contains a fundamental structural contradiction:

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The Grid Demise Dilemma: If grid supplied electricity is projected to be cheap and abundant, what economic rationale justifies an ordinary consumer investing hundreds of thousands of rupees in capital intensive battery storage systems?

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The Death Spiral of the Grid: If consumers increasingly transition to solar generation and battery storage, effectively defecting from the national grid, who will remain to purchase this supposedly cheap grid generated power?

Mr. Minister, these remarks underscore a deeper institutional crisis: the highest tiers of our policymaking apparatus appear fundamentally decoupled from the basic dynamics of energy economics, grid management, and storage technologies. This absence of conceptual clarity indicates that the government lacks the technical capacity and structural understanding required for meaningful energy sector reforms. Instead, the nation is served contradictory narratives detached from economic reality.

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IMF Commitments vs. Public Rhetoric: Kindly clarify whether the Government of Pakistan assured the IMF during recent structural negotiations that, effective January 2027, electricity tariffs would continue escalating toward Full Cost Recovery via subsidy rationalization and upward tariff adjustments. If these sovereign commitments stand, on what economic basis are promises of cheap electricity and public relief being engineered? Is the state operating on a dual narrative model, one of fiscal austerity for international financial institutions and another of political optimism for the domestic populace? Does the government possess a coherent, written, long term policy framework independent of external institutional dictates?

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The Fiscal Equation: What specific economic or technical formula guarantees a decline in electricity tariffs despite strict IMF conditionalities, rigid Capacity Charges, and an escalating Circular Debt that now exceeds PKR 1,764 billion? A meaningful tariff reduction remains mathematically impossible while this debt burden remains structurally embedded within the billing mechanism.

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Transparency of Rollout Plans: What is the precise date for the commencement of this low tariff era? If a comprehensive policy framework exists, why have its financial feasibility studies and strategic rollout plans been withheld from public and academic scrutiny?

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Tariff Model Specifications: What constitutes the actual baseline for this projected tariff relief? Will it materialize through the deep renegotiation of legacy PPAs, a radical rebalancing of the energy mix (solar/wind), or an entirely new Tariff Model? If prices are bound to fall, why do current billing cycles show an aggressive upward trend in Fuel Cost Adjustments (FCA), quarterly adjustments, and surcharges?

The Bill vs. The Rhetoric

It is a matter of record that on January 8, 2025, you assured a National Assembly committee that electricity prices would decline by PKR 10 to 12 per unit. Yet, consumers have faced relentless tariff hikes since.

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In February 2026, an FCA of PKR 2.06 per unit was added.

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This was followed by a quarterly adjustment of 35 paisas per unit (March to May period).

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An additional 26 paisas per unit was levied during April and May 2026.

Cumulatively, consumers were burdened with an incremental PKR 2.67 per unit within a multi month window. Should the public believe ministerial speeches or the fiscal reality printed on their utility bills?

Furthermore, in June 2025, your Ministry secured USD 4.5 billion (approx. PKR 1,275 billion) from 18 commercial banks to short term manage the circular debt and sustain IPP cash flows. To service this commercial debt, a Debt Servicing Surcharge of PKR 3.23 per unit has been levied on consumers, contractually locked until 2031.

With recent data before the Senate Committee indicating that annual IPP payment obligations have surged back to approximately PKR 3,400 billion in May 2026, the nation is fully justified in demanding answers to the following structural questions:

1. What is the institutional funding mechanism for these compounding future liabilities?

2. Has Pakistan’s power sector fallen into a structural debt trap, reliant on perpetual commercial borrowing to service sovereign liabilities?

3. If successive crises are merely mitigated through high interest debt rollovers, what constitutes the actual long term structural solution?

4. What specifically are the foundational parameters of the “historic reforms” celebrated in official state narratives?

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Question No. 3: How Can the State Exit the “Single Buyer” Model While Sovereign Guarantees Remain in Force?

Mr. Minister,

The policy intent to transition the state away from electricity procurement introduces severe legal and financial vulnerabilities.

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Sovereign Guarantees vs. Market Exit: If the government exits the Single Buyer model, what is the survival strategy for the legal sanctity of existing IPP contracts backed by unconditional Sovereign Guarantees issued by the State of Pakistan?

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The Operational Reality of CTBCM: Has the Competitive Trading Bilateral Contract Market (CTBCM) matured into a fully operational, liquid market capable of enabling private market participants to clear transactions independently without state backed counterparty risk?

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Liability Transition: If the state abdicates its role as the central offtaker, which market entity or legal mechanism will assume the multibillion rupee Capacity Payment obligations legally locked into current contracts?

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Arbitration and Default Risks: Does this aggressive transition not expose the Pakistani state to international arbitration, catastrophic contractual disputes, and systemic sovereign default risks?

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Risk Allocation: In exiting the Single Buyer framework while legacy IPP contracts operate under strict Take or Pay mandates, exactly to which institutional balance sheet, market participant, or regulatory structure will these long term financial liabilities be transferred?

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Question No. 4: What is the Financial and Contractual Architecture of the Smart Meter Deployment?

Mr. Minister,

Your address highlighted the mass deployment of smart meters as a technological milestone. Reports indicate a state framework, coordinated with the International Finance Corporation (IFC) and the Asian Development Bank (ADB), to deploy approximately 10 million smart meters utilizing blended domestic and foreign private capital.

The structural concern, however, lies in the underlying financial engineering of this initiative:

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Capital Recovery and Returns: If this infrastructure is deployed via private equity, what are the exact cost recovery and profitability mechanisms, and which corporate entities have been shortlisted?

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The Next IPP Crisis in the Making? While technological modernization via advanced metering infrastructure (AMI) is vital, Pakistan’s historical experience with the IPP model justifies public anxiety.

Will this project transition into another long term, unbacked financial liability for the consumer?

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Transparency of the Business Model: You noted that global procurement competition reduced three phase meter costs from PKR 45,000 to PKR 25,000, projectively saving the public PKR 150 billion. If these efficiencies are accurate, why does the complete business model, including tender protocols, escrow arrangements, and payment structures, remain withheld from public scrutiny? The Ministry must publish the complete Financial Model on its web portal for independent evaluation by energy economists, grid engineers, and policy analysts.

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Guarantees and Domestic Value Addition: Are private investors in this deployment being insulated with fixed returns or Sovereign Guarantees modeled after the legacy IPP frameworks? Were these concessions awarded through open, competitive international bidding? Furthermore, will these assets be manufactured locally to catalyze domestic industry and preserve foreign exchange reserves, or are they dependent on direct imports?

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Revenue Offtake and Workforce Implications: If private entities are integrated into billing and revenue recovery operations, will they command a permanent percentage of consumer revenue collections? In the event of under recovery or technical losses, does the financial liability rest with the state, the consumer base, or will the private concessionaires absorb the downside risk entirely? Finally, if large scale private distribution operations are institutionalized, what is the strategic transition plan for the existing DISCO workforce and its massive legacy institutional overheads?

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Question No. 5: Who Will Absorb the Revenue Shortfall of Subsidized Industrial and Agricultural Tariffs: The State, The IMF, or Domestic Consumers?

Mr. Minister,

You have announced tariff reductions for the agricultural and industrial sectors, yet the underlying fiscal mechanism remains completely unaddressed. Who will ultimately absorb the financial weight of this relief? On one hand, power sector circular debt escalates unabated, while on the other, the IMF Full Cost Recovery model strictly dictates that the true cost of electricity must either be recovered directly from consumers or transparently accounted for within the federal budget.

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The Cross Subsidy Dilemma: If subsidized electricity is granted to industry and agriculture, through what specific mechanism will the resulting revenue shortfall be recouped? Will this financial burden be transferred to ordinary domestic consumers through cross subsidies, new surcharges, fuel adjustments, additional taxation, or deferred power charges?

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The Contradiction of Relief: Relieving one sector by disproportionately taxing another, especially domestic and protected consumers, fundamentally invalidates your claim of providing cheap electricity. Does the government possess an independent budgeted fund to finance this relief, or is this merely an administrative transfer of financial liabilities from one consumer class to another?

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Guarantees of Non Transferability: Can the government categorically guarantee that the cost of this industrial and agricultural relief will not be clawed back from the public in the future through fuel cost adjustments, surcharges, regulatory duties, or novel billing components?

To comprehend the operational reality, answers to the following three sub questions are imperative:

1.Budgetary Allocation: What specific quantitative amount has been allocated within the federal budget to cover the revenue shortfall generated by this industrial and agricultural relief?

2.Fiscal Impact Publication: Have NEPRA or the Ministry of Finance published a formal fiscal impact assessment regarding these subsidized tariff lines?

3.The IMF Conundrum: Under the strictures of the IMF Full Cost Recovery model, if this revenue shortfall is not sustained through explicit budgetary subsidies, will it not automatically distort the tariff structure and default onto domestic consumer bills?

Question No. 6: Given Pre-existing Excess Capacity and Severe Transmission Bottlenecks, On What Basis Was an Additional 10000 MW of IPP Generation Planned?

Mr. Minister,

In your video address, you asserted that plans for an additional 10000 megawatts of new IPP projects have been halted. The fundamental question is this: when the state already possessed an installed capacity far exceeding peak national demand, whose policy vision directed the expansion of a further 10000 megawatts?

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The Grid Evacuation Paradox: Multiple NTDC reports and independent energy experts had repeatedly demonstrated that the operational evacuation capacity of the national grid was constrained between 22000 and 25000 megawatts. Under what economic or technical feasibility model was the decision taken to inject an additional 10000 megawatts when installed capacity already breached 43000 megawatts?

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Systemic Misalignment: When the core vulnerability of the power sector was never generation but rather transmission, distribution, high AT&C losses, and the absolute necessity of grid modernization, why were national financial resources continuously funneled into predatory generation plants instead of grid infrastructure?

Kindly provide precise institutional clarity on the following points:

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Demand Forecasting Scrutiny: Prior to the approval of these halted expansion plans, was an independent demand forecasting exercise or a transparent review of the Indicative Generation Capacity Expansion Plan (IGCEP) ever executed?

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Regulatory Accountability: If such studies exist, which specific think tank, state consultant, or regulatory body manufactured those fabricated data points that projected such unrealistic GDP growth and power demand elasticity?

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Data Transparency: Does the government intend to lay the feasibility reports, NEPRA tariff summaries, and Power Purchase Agreements (PPAs) of all generation projects approved between 2015 and 2026 before the Parliament, the Public Accounts Committee, and the public?

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Criminal Liability: The Ministry celebrates nominal savings achieved through negotiated revisions or terminations of existing IPP contracts. However, why has no criminal inquiry, FIR, or formal accountability process via NAB or the FIA been initiated against the ministers, power division bureaucrats, NEPRA officials, or NTDC executives who approved these unfeasible projects? Does a catastrophic misallocation of sovereign resources that plunges the state into economic peril carry absolute institutional immunity?

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Question No. 7: Is Private Capital Truly Interested in Acquiring Deficit Ridden DISCOs, and What is the Logic of Launching a Private Smart Meter Project Prior to Privatization?

Mr. Minister,

You stated that state owned distribution companies (DISCOs) will be transferred to the private sector within the next two years. While this narrative has been repeatedly deployed, the commercial reality remains highly questionable.

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The Investor Rationale: What rational private entity or institutional investor would deploy capital to acquire distribution utilities characterized by negative equity, trillions of rupees in circular debt liabilities, unsustainable line losses, and systemic power theft? Will the state provide a structural guarantee for comprehensive debt restructuring, and will the liability of legacy line losses rest with the acquirer or remain absorbed by the federation?

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The Smart Meter Contradiction: If the strategic objective is complete privatization, what is the policy rationale for introducing a parallel private sector initiative for smart meter installation prior to corporate divestment? Would it not be structurally sound to allow the eventual utility buyers to deploy Advanced Metering Infrastructure according to their own financial and capital expenditure models?

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Asset Encumbrance Risks: Awarding extensive metering contracts to private consortia immediately prior to privatization creates significant asset encumbrance, binding future utility owners to pre existing contractual obligations. Does the Ministry possess a transition framework outlining how these third party metering concessions will merge with the balance sheets of new utility owners? Has an anchor investor formally expressed transaction interest, or does this privatization plan reside entirely within a non binding letter of intent stage?

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Question No. 8: Does a Three Month Target for Replacing Defective Meters Suffice to Dismantle the Structural Corruption and Over-billing Mechanisms of DISCOs?

Mr. Minister,

Your claim that defective meters will be replaced within a strict three month timeline to protect consumers assumes this is a mere administrative bottleneck.

In reality, the deliberate classification of operational meters as defective and the subsequent delays in their replacement constitute a systemic tool utilized by DISCOs for predatory detection billing. This over billing is not an operational anomaly; it functions as an illicit economic model designed to artificially suppress reported line losses and cover up employee collusion in power theft.

Had the Ministry analyzed the following structural dynamics, this administrative claim would have been recognized as fundamentally insufficient:

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The Empirical Record: According to NEPRA records, what exact percentage of meters declared defective over the past fiscal year were genuinely replaced within the mandated three month window? Will the Ministry publish verified, audited data to substantiate this claim?

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Revenue Manipulation Mechanisms: Regulatory audits confirm that deploying estimated billing via defective meter profiling serves as a revenue manipulation mechanism to camouflage distribution inefficiencies. How can a simple three month timeline dissolve this structural incentive when the power to audit, declare, and delay meter status remains entirely within the discretion of the same DISCO personnel who financially profit from the manipulation?

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Automated Remote Reporting: Will the proposed smart meter framework integrate automated remote reporting of meter degradation directly to NEPRA or an independent data clearinghouse, thereby bypassing DISCO human intervention? If manual inspection and discretionary reporting loops remain intact, a three month deadline is nothing more than a non binding administrative target.

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Question No. 9: Do the Recent IPP Renegotiations Represent a Genuine Structural Breakthrough or Merely an Exercise in Temporary Fiscal Accounting?

Mr. Minister,

You claim that the recent renegotiation of IPP contracts will yield approximately PKR 3.5 trillion in savings for the state over the next 15 years. Is this a realized, hard cash saving, or are avoided future liabilities merely being repackaged to present a political victory?

An analytical deconstruction of the data reveals a profoundly different fiscal landscape:

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The Capacity Charge Disconnect: Amortizing this claimed saving over 15 years yields an annualized relief of approximately PKR 233 billion. Concurrently, the national exchequer and consumers remain burdened with over PKR 2000 billion in annual Capacity Payments, while the power sector circular debt has surged toward PKR 3400 billion.

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Structural Preservation: While your administration secured nominal concessions regarding dollar indexation and select operational parameters, the foundational architecture remains untouched. Dollar linked returns persist, sovereign guarantees remain active, the predatory take or pay model remains legally binding, capacity charges flow uninterrupted, and the circular debt continues its upward trajectory. Where exactly have the fundamental structural reforms occurred?

Furthermore, multiple sovereign audit reports and independent investigative committees have unearthed severe institutional infractions by select IPPs, including excess profiteering, heat rate manipulation, and fraudulent over invoicing.

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The Legal Alternative: If the state possessed verified forensic evidence of these contractual breaches and misrepresentations, why did the government refrain from initiating comprehensive legal proceedings before international arbitration forums, British courts, or domestic judicial platforms?

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The Forfeiture of Rights: Proven misrepresentation or fraud constitutes valid legal grounds for the outright rescission of Power Purchase Agreements (PPAs), which would have permanently liberated the state from the burden of capacity payment liabilities. Why did the Ministry abandon the path of forensic accountability, financial recovery, and strict legal enforcement in favor of a compromising negotiation framework? Why was the recovery of misappropriated public wealth forfeited, preventing true, long term tariff relief for the citizens of Pakistan?

Mr. Minister,

These nine questions are not the mere preference of a single individual. They constitute the formal case of millions of Pakistani consumers who have spent decades paying the heavy price of flawed policies, corruption, and administrative incompetence by sacrificing the basic sustenance of their families.

We urge that the formal responses to all these questions be officially published on the web portal of the Ministry of Energy so that the nation can directly evaluate and comprehend the empirical realities.

It is expected that you will address these queries using concrete facts, verified data, and documentary evidence. This is essential to establish the true benchmarks of transparency, institutional accountability, and public trust that your administration continuously claims to uphold.

Providing reasoned and documented answers to the nation will not only set a progressive institutional precedent but will also steer the ongoing national discourse regarding Pakistan’s power sector in a serious and realistic direction.

With high regards,

Syed Shayan

President and CEO

SyedShayan.com

Think Tank for National Development, Real Estate Syndication and Community Living

Email | mail@syedshayan.com

17 May 2026 | Lahore