The Working Capital Scam: NEPRA's Quietest Subsidy to IPPs
How a single accounting mismatch between monthly payments and quarterly tariff calculations costs Pakistani consumers billions every year
By Asad Baig · Lahore · April 2026 · Approx. 6-min read
The smallest scandal that costs the most
Of all the findings in the 2020 Power Sector Inquiry Report, this one rarely makes headlines. It does not have the drama of the 40 families. It does not have the geopolitics of CPEC. It does not have the visible suffering of the textile collapse.
It is a single accounting mismatch between the schedule on which IPPs are paid and the schedule that NEPRA assumed when calculating their tariff. The mismatch is two months per quarter. The cost, sustained over decades, runs into billions of rupees per year of unjust profit.
Most Pakistani journalism never explained it. Most Pakistanis have never heard of it. This article fixes that. It will take six minutes to read.
If you want the broader context, see my pillar on capacity payments. If you want the regulator's broader failures, see NEPRA: The Regulator That Did Not Regulate.
What the working capital scam actually is
The working capital scam is the name given to a difference between two assumptions in Pakistani IPP tariff calculation.
NEPRA, the National Electric Power Regulatory Authority, calculates the tariff each IPP is allowed to charge. Part of that tariff is meant to compensate the IPP for the cost of working capital. Working capital is the money a business needs on hand to operate while waiting to be paid by its customer.
NEPRA assumed, in its tariff calculations, that the IPPs were paid quarterly. Three months of waiting, then a payment. So the tariff included compensation for two months of working capital each quarter, the cost the IPP would supposedly bear by waiting to be paid.
The actual payments, made by the Central Power Purchasing Agency (CPPA-G), were monthly. The IPPs received their money every thirty days, not every ninety. They never actually waited the two extra months that NEPRA had built into the tariff.
So the IPPs received compensation for a cost they were not actually incurring. Every quarter. For every IPP. For decades.
The 2020 inquiry estimated the cost of this single technical error at billions of rupees per year of unjust profit. Multiplied across all IPPs operating under both 1994 and 2002 power policies, sustained from the late 1990s onward, the cumulative excess paid to IPPs runs into tens of billions of rupees, possibly more.
THE WORKING CAPITAL SCAM IN ONE SENTENCE
The regulator assumed IPPs were paid every three months and built that cost into the tariff. The IPPs were actually paid every month. The two-month difference was paid by consumers, in their bills, but never actually owed by the IPPs. Multiply by every quarter for every plant for two decades.
Why this is not just a clerical error
Sceptics could read what I have written and say: this sounds like an accounting mistake. Why call it a scam?
The answer is that the discrepancy was known. Throughout the years that NEPRA was approving these tariffs, the actual payment schedule was monthly and the assumed schedule was quarterly. This was not a hidden fact. CPPA-G payment records were available. NEPRA tariff calculations were available. Anyone who looked at both side by side could see the mismatch.
The 2020 Power Sector Inquiry, when it actually looked at both, found the discrepancy in days. The Muhammad Ali committee did not need exotic forensic tools. They needed only to compare two sets of records.
NEPRA had access to the same records. NEPRA chose, for two decades, not to perform the comparison. Or, alternatively, performed it and chose not to act on the findings.
Either explanation is damning. Either NEPRA was systematically failing at basic regulatory due diligence, or it was knowingly approving tariffs based on an assumption that did not match the operational reality. Both interpretations describe a regulator that was not protecting consumer interests.
This is why I describe it as a scam, not an error. An error is something nobody noticed. A scam is something somebody noticed and did nothing about. The working capital arrangement falls squarely into the second category.
What this looks like in your bill
The working capital scam is invisible on your bill. There is no line item that says "extra working capital paid to IPPs." It is folded into the per-unit tariff that you pay for every kilowatt-hour you consume.
But the math is mechanical. Every billion rupees of extra working capital paid to IPPs is a billion rupees that flowed out of consumer pockets and into IPP bank accounts. Multiply by years. Multiply by the entire fleet.
For a typical middle-class household using 600 units per month, the working capital component embedded in the tariff is small in any individual month. Maybe Rs. 50, maybe Rs. 100. Trivial.
But trivial small numbers, multiplied across forty million households, twelve months a year, for two decades, sum to very non-trivial totals. The 2020 inquiry's estimate of billions per year, when you compound it across two decades, comes to a cumulative excess in the tens of billions of rupees.
That is the cost, on top of every other cost, that consumers have paid for this single accounting mismatch.
Why it has not been fixed
After the 2020 report became known, NEPRA's response was instructive. The regulator claimed it had not been "consulted" on the report's findings about NEPRA's own conduct. This was technically accurate and substantively meaningless. The findings concerned NEPRA's historical decisions, which were already in NEPRA's own records.
There was no internal review. No NEPRA officials resigned. No tariffs were revised. The working capital arrangement continued.
The full report was, to my knowledge, never officially released. Civil society organisations have requested it under right to information laws. Their requests have been rejected or ignored. As of April 2026, the report remains buried.
The PTI government that commissioned the report did not pursue it after the report was buried under foreign pressure. The Shehbaz Sharif government that followed has also not pursued it. Five domestic IPPs have been terminated, and fourteen others renegotiated, but the working capital arrangement on the remaining plants has not been corrected.
This is, in some ways, the most disappointing finding of all. The working capital scam is technically simple. It does not require confronting Chinese state-owned enterprises. It does not require renegotiating CPEC. It does not require taking on the Mansha or Dawood empires. It requires NEPRA, or a successor body, to recalculate the tariff using the actual payment schedule. That is it.
It has not been done.
What you can do
The working capital scam is one of those issues where ordinary citizens have very little leverage individually. It cannot be solved by going off-grid. It cannot be solved by installing solar. It cannot even be solved by reducing your consumption.
What you can do is make it a known issue. The system has survived because it has been hidden behind technical language about working capital, tariff calculation methodology, and CPPA-G payment schedules. The technical language has obscured what is, at its core, a very simple story.
The story is this. The regulator was supposed to verify the assumptions underlying the tariff. It did not. The result was billions of rupees of unjust profit transferred from consumers to IPPs over two decades. The fix is mechanically straightforward. It has not been done.
Share this article with people who pay an electricity bill in Pakistan. Make the working capital scam common knowledge. Politicians who lie about your bill begin to lose elections only when enough voters know what to ask.
The next time a politician promises "tariff reform," ask: will you direct NEPRA to recalculate the working capital component of all IPP tariffs to match the actual monthly payment schedule, with credit applied to consumers for past excess? Make support conditional on a specific commitment with a specific timeline.
In closing
The working capital scam is a small example of how the IPP system works. Small in headline value. Large in cumulative cost. Invisible to ordinary citizens. Known to the regulators who approved it. Documented by the inquiry that exposed it. Unaddressed by the governments that should have fixed it.
It is, in many ways, the entire IPP system in miniature. A technical detail that produces a wealth transfer. A regulator that does not regulate. An inquiry that gets buried. A reform that does not happen. A consumer who keeps paying.
Now you know about it. Pass it on.
Thank you for reading.
, Asad Baig, Lahore, April 2026
Frequently asked questions
What is the NEPRA working capital scam? A discrepancy between NEPRA's tariff assumption that IPPs were paid quarterly and the actual practice that they were paid monthly. The two-month difference was compensated through the tariff but never actually owed by the IPPs. The 2020 Power Sector Inquiry Report estimated the resulting unjust profit at billions of rupees per year.
How much has the working capital scam cost Pakistani consumers? The 2020 inquiry estimated the annual unjust profit at billions of rupees. Sustained from the late 1990s through 2026, the cumulative excess paid by Pakistani consumers runs into tens of billions of rupees, possibly more.
Has the working capital scam been corrected? No. The 2020 report's recommendation has not been acted upon. The Shehbaz Sharif government has terminated five IPPs and renegotiated fourteen others, but the working capital arrangement on the remaining plants has not been recalculated. The fix is mechanically straightforward and does not require confronting Chinese CPEC plants or the largest Pakistani IPP families. It has not been done.
Why did NEPRA approve the working capital arrangement for so long? Either NEPRA failed at basic regulatory due diligence and never compared its tariff assumptions against actual CPPA-G payment records, or it performed the comparison and chose not to act. The 2020 inquiry did not definitively resolve which explanation is correct. Both interpretations describe a regulator that was not protecting consumer interests.
Where does the working capital scam show on my electricity bill? It does not appear as a separate line item. It is folded into the per-unit tariff that you pay for every kilowatt-hour. The cost is invisible per individual bill, but cumulative across the system it is in the tens of billions of rupees over two decades.
Sources and notes
- Power Sector Inquiry Report 2020, Government of Pakistan, headed by Muhammad Ali, former SECP Chairman (ARY News mirror)
- NEPRA State of Industry Reports 2015-2024 (nepra.org.pk)
- CPPA-G Annual Reports (cppa.gov.pk)
- IEEFA Reports on Pakistan Power Sector by Haneea Isaad (2024-2025)
- Dawn, Top NEPRA officials hike salaries without cabinet nod (17 February 2025)
Related reading from Asad Baig
The pillar this explainer supports
Sibling explainers in this cluster
- What Is a Take-or-Pay Contract? A Plain-English Guide for Pakistanis
- The Capital Cost Trick: How Inflated Costs Locked In Inflated Tariffs
- NEPRA: The Regulator That Did Not Regulate
Asad Baig