Pakistan's Electricity Crisis: The Complete Guide (1994 → 2026)

How forty families, five prime ministers, and one quiet bureaucracy built the trap your bill is now paying for

By Asad Baig · Lahore · April 2026 · Approx. 22-min read

The bill on the kitchen table

It was a Tuesday in July 2024. My friend Imran called me. He runs a small printing press in Anarkali, Lahore. Eight employees. Twenty-two years in business.

"Yaar," he said. "Mera bill aaya hai. Tum maano gay nahin."

His monthly electricity bill, which had been around Rs. 45,000 a year ago, was now Rs. 1,30,000. In one year. For the same press, with the same eight machines, running the same eight hours a day.

"What am I supposed to do?" he asked. "Should I close down? Should I fire my workers? Should I just hand over the keys?"

I did not have an answer for him. Nobody did.

That conversation was the start of a year of reading. I read because I was angry. I read because Imran was the third friend who had asked me the same question that month. I read because I wanted to understand how a country with enough power generation capacity for its needs could not afford to use it.

What I found is what this article contains. It is not the story you are usually told. The usual story blames mismanagement, theft, fuel prices, the previous government. All of these are partially true. None of them is the main truth.

The main truth is simpler and uglier. Thirty years ago, in 1994, a small group of Pakistanis signed a set of contracts with a small group of investors. The contracts said: pay us, in dollars, fifteen to eighteen percent of our investment, every year, for thirty years, whether we produce electricity or not. Pay us if the rupee falls. Pay us if you do not need our electricity. Pay us if our plants sit idle. Just pay us.

That was the deal. Pakistan signed it. Successive governments expanded it. Today, we pay roughly two trillion rupees a year, more than our defence budget, under that deal and the deals that followed.

When my friend Imran lost his business, that was where his money was going. When the textile mill near your house closed, that was where its money was going. When you opened your latest bill and felt sick, that is where your money is going. Right now. This month.

This guide is the full story. Who decided. Who profited. Why no government has been able to fix it. And why no individual escape, not solar panels, not off-grid systems, not even leaving the country, can fully save you from it.

It is written in plain English because the information is too important to be locked behind technical language. If you can read a newspaper, you can read this. Every claim is sourced. Nothing is invented. The truth is dramatic enough on its own.

Welcome to the complete guide.

The one-sentence story

Pakistan is paying approximately Rs. 2 trillion per year to a small number of power plant owners, most of them roughly forty Pakistani business families, foreign investors, and Chinese state-owned enterprises, under contracts signed between 1994 and 2018 that guarantee them dollar-indexed returns of 15 to 34 percent regardless of whether their plants produce electricity, and the system has been engineered so that no individual citizen can fully escape paying their share of it.

That is the one-sentence story. The rest of this guide is the documentation, the names, the dates, and the answer to "how did this happen?"

The number that should make you angry

Two trillion rupees per year, in capacity payments to independent power producers, as of FY2025. The figure has been confirmed by multiple sources, the IEEFA reports by Haneea Isaad, the International Growth Centre's June 2025 work, and the 2020 Power Sector Inquiry Report.

To put that figure in scale:

Indicator	Amount
Pakistan's annual capacity payments to IPPs (FY2025)	~Rs. 2,100 billion
Pakistan's federal defence budget	~Rs. 2,100 billion
Health and education spending combined	Less than capacity payments
Per-citizen equivalent (240 million people)	~Rs. 8,500 per person per year
Cumulative capacity payments 2015-2025	~Rs. 12,000 billion (twelve trillion)

That last number is the one to sit with. Twelve trillion rupees, over the past decade, paid to power plant owners. For a sense of scale: that is roughly the cost of building twelve new dams the size of Tarbela. We did not build the dams. We paid the capacity charges instead.

We did not pay this money for electricity received. We paid it for the contractual right of certain power plants to exist.

Read that line again. I want it to sit with you for a moment.

In FY2023-24, two specific plants, HUBCO and KAPCO, received approximately Rs. 46 billion from the Pakistani government. In that same year, those two plants produced exactly zero units of electricity. Not low production. Zero. They sat there. We paid them. The figure was confirmed publicly by Gohar Ejaz, the former federal minister, in July 2024.

In the same year, forty-one other plants in Pakistan operated at four to twenty-five percent of nominal capacity. They produced very little. They received their full capacity payment anyway.

Pakistan has built power generation capacity totalling 45,605 megawatts. Pakistan's peak national demand is approximately 28,000 to 30,000 megawatts. Pakistan pays for all 45,605 megawatts every single day. The 15,000+ megawatts of permanently unused capacity costs roughly Rs. 700 billion per year on its own.

This is not a temporary mismatch. It is a structural feature of the contracts.

If you want to know in detail what a capacity payment actually is and how it ends up on your bill, I have written a separate explainer at Capacity Payments in Pakistan: Why Your Bill Is So High. The short version, for this guide, is that capacity payments make up approximately 40 percent of every rupee on your electricity bill, and the contracts that created them are the single largest reason Pakistani electricity is now twice as expensive as Bangladesh's, Vietnam's, or India's.

How did we get here? The story has four chapters.

1994, the year everything was decided

Every dysfunctional system has a moment of origin, a specific decision, made on a specific date, by specific people, that defined everything that followed. For Pakistan's power sector, that moment was the 1994 Power Policy.

To understand what happened, you have to understand what Pakistan was in 1994.

The country was in chronic crisis. The economy had been growing slowly. Foreign exchange reserves had dwindled. Industrial output was constrained by a power deficit that produced eight to ten hours of daily load shedding in major cities. The Bhutto government had returned to power with a mandate to fix the economy. They needed a quick win.

The Western financial institutions, the World Bank, the Asian Development Bank, had a template ready. It was called BOO/BOT, Build, Own, Operate / Build, Operate, Transfer. Private investors would build power plants. Governments would guarantee them returns. The model had been used in the Philippines, Thailand, Indonesia. It was presented as the modern solution to developing-world energy crises.

Pakistani technocrats and ministers absorbed this template. The 1994 Power Policy was the result. On paper, it was an industrial policy. In practice, it was a transfer mechanism.

The terms

The contracts that flowed from the 1994 policy contained provisions that, examined together, created a structure where the investor took essentially no risk and the Pakistani consumer absorbed all of it for thirty years.

Provision	What it said	What it meant
Return on equity	15-18% annual return guaranteed	Roughly three times what investors got in their home countries
Currency	Returns indexed to US dollar	As the rupee fell, payments rose automatically
Take-or-pay	Government must pay capacity charge regardless	Plant gets paid even if zero electricity is produced
Sovereign guarantee	Government of Pakistan guarantees performance	If WAPDA defaults, the state is directly liable
Tariff ceiling	US 6.5 cents/kWh (negotiated, not auctioned)	Set by bureaucrats, not the market
Contract duration	25-30 years	Locked in across multiple governments
Capital cost pass-through	All capital costs included in tariff	Inflated capital costs = inflated tariffs forever
Dispute resolution	International arbitration	Pakistani courts have no real jurisdiction

Each of these provisions, examined in isolation, has a justification. Investors needed protection. Currency risk had to be allocated. But combined, they created a structure where the investor took essentially no risk and the Pakistani consumer absorbed all of it for thirty years.

The capital cost trick

The most damaging provision was capital cost pass-through. Here is how it worked in practice.

HUBCO, Pakistan's first major IPP, had a projected capital cost in 1988 of approximately $1.2 billion. By the time the plant was financially closed in 1995, the stated capital cost had risen to $1.766 billion, a 47 percent increase. The reasons offered included the Gulf War, currency volatility, and design changes. The reality was different.

Subsequent investigations would reveal that capital costs for Pakistani IPPs were systematically inflated through over-invoicing on equipment, inflated engineering services contracts, and aggressive depreciation schedules. The investigations would find that some 1994-era IPPs had effective capital costs three to four times higher than comparable plants in Bangladesh and Vietnam.

Why did this matter? Because tariffs were calculated as a percentage of capital cost. If the real cost of building a plant was $200 million, but the contracts allowed billing on $400 million, then for thirty years the consumer would pay double what they should have, perfectly legally, under the terms of the agreement.

Once the over-invoiced capital costs were locked into the Power Purchase Agreements, they became legally protected. Pakistani regulators could not easily challenge them without triggering international arbitration. The fraud, if it could be called that, was committed at the moment of contract signing, and rendered legally untouchable thereafter.

I have written about this mechanism in detail at The 1994 Power Policy: How One Year Locked Pakistan Into Thirty.

Who signed it

It is important to understand that the 1994 Power Policy and its subsequent IPP contracts were not the work of a single person. They were a collective bureaucratic-political product, involving the Prime Minister's Secretariat, the Ministry of Water and Power, the Privatisation Commission, WAPDA leadership, the federal cabinet, foreign consultants, and senior bureaucrats from the Pakistan Administrative Service.

This is not a story of one corrupt prime minister. It is a story of a bureaucratic-political consensus that was wrong about almost everything fundamental, and that has never been held to account because the responsibility was so widely distributed that no individual could be cleanly blamed.

2002, the same mistake, modernised

By 2002, the consequences of the 1994 contracts were already clear. Capacity payments were eating into the federal budget. Circular debt was beginning to grow. Industry was complaining about high tariffs. Anyone with eyes could see the structural problem.

The Musharraf government, advised by many of the same technocrats who had advised the 1994 government, introduced an updated Power Policy in 2002. The official line was that this policy "fixed" the problems with 1994. The Return on Equity was reduced from 18 percent to between 12 and 13 percent. Some elements of competitive bidding were introduced. Some tax incentives were trimmed.

On the surface, this was an improvement. In substance, it was the same disease.

The dollar indexation was kept. The take-or-pay structure was kept. The capital cost pass-through was kept. The thirty-year contracts were kept. NEPRA, the regulator that had failed to do its job under the 1994 framework, was kept in charge of approving 2002 tariffs.

The 2020 inquiry would later find that 2002-policy IPPs had received excess payments, above what their contracts even legally allowed, of about Rs. 64 billion in just the nine years before 2020. The total excess over the remaining life of the contracts was projected at Rs. 209 billion. The same patterns of cost over-statement, the same tariff inflation, the same comfortable arrangement between regulator and regulated.

The Musharraf government also introduced something new and even worse, Rental Power Plants. Mobile generators rented from foreign companies on short-term contracts to address load shedding while the IPP capacity was being built out. The RPPs produced the most expensive electricity in Pakistan's history. They were prosecuted as one of the largest corruption scandals of the era. Former Prime Minister Raja Pervaiz Ashraf, who was the federal minister responsible, was nicknamed "Raja Rental." Cases were filed. Almost none resulted in recovery of funds.

So 2002 added two things to the existing problem. A second wave of IPPs with the same structural defects. And a corruption scandal, the Rental Power Plants, that became its own legend.

2006, the renewable energy framework that was hijacked

In 2006, also under Musharraf, Pakistan introduced an updated framework for renewable energy projects. Wind farms. Solar plants. Bagasse plants that burn the waste from sugar mills.

The intentions were good. Renewable energy was the future. Pakistan needed to diversify its generation mix. Cheaper, cleaner power was the goal.

The execution was, as always, terrible. The renewable IPPs were given the same upfront tariff structures, the same capacity payment guarantees, the same dollar indexation. Some wind plants were approved at costs four times higher than comparable plants in Bangladesh and Vietnam. Some bagasse plants were structured to give sugar barons additional income streams from electricity sales, making sugar mills, in effect, dual-revenue enterprises subsidised by the electricity consumer.

Among the bagasse IPPs are JDW Sugar Mills Units 2 and 3, owned by Jahangir Tareen, who was disqualified for life from parliament by the Supreme Court for financial dishonesty in 2017. He continues to operate the IPPs. He has been paid roughly Rs. 2.5 billion in capacity charges in recent years.

Chiniot Power Limited, owned by Suleman Shehbaz, son of the current Prime Minister Shehbaz Sharif and an officially proclaimed offender in a Rs. 16 billion FIA money-laundering case, is also a bagasse IPP from this era. He lives in London. The plant continues to receive capacity payments from a government headed by his father.

The 2006 framework gave the upper class of Pakistan's sugar industry, already politically powerful, already protected by sugar import controls and price supports, an additional channel of state-guaranteed income. They are called "renewable" because they technically use a renewable input. In practice, they are a transfer mechanism wearing a green label.

2014-2018, CPEC, the deeper trap

The fourth wave was the most damaging.

Between 2014 and 2018, under the third Nawaz Sharif government, Pakistan signed contracts with Chinese state-owned enterprises for approximately twenty-one new power plants. Combined capacity: about 6,000 megawatts. Combined contract value, including financing: around $35 billion.

These were the China-Pakistan Economic Corridor power plants. CPEC, as it became known. Sahiwal coal. Port Qasim coal. Shanghai Electric Thar coal. China Hub coal. Karot Hydropower. Many more.

The terms agreed for CPEC IPPs were significantly worse than the terms of the 1994 policy.

THE TERMS COMPARED

1994 IPPs: 15-18% return on equity, in dollars. Already considered too generous.

CPEC IPPs: 27-34% return on equity, in dollars. Almost double. Some Chinese plants achieved internal rates of return over 30%, on plants whose financing came mostly from Chinese state banks.

Why did Pakistan agree to such terms?

The honest answer involves several factors. Pakistan in 2014 was suffering from intense load shedding, sixteen to twenty hours a day in summer. The economy was barely growing. Western financiers had become reluctant to fund coal projects. The World Bank had policy restrictions. The Asian Development Bank was slow.

China offered something nobody else offered. Money. Speed. No environmental conditions. No human rights conditions. No anti-corruption conditions. The plants would be built in three years, not seven. The electricity would flow.

In exchange, Pakistan agreed to terms that locked in Chinese state-owned companies for thirty years at returns that were, by international standards, extraordinary.

The Sahiwal and Port Qasim findings

The 2020 Inquiry Report contained specific findings about Chinese CPEC plants that have rarely been publicly discussed.

At Sahiwal, the inquiry found excess capital costs of approximately Rs. 32.46 billion, allowed because of misrepresentation by sponsors regarding the period for which interest charges were calculated. The interest had been calculated for forty-eight months, when the plant was actually completed in twenty-seven to twenty-nine months. The difference, multiplied by the cost-plus tariff structure, generated excess Return on Equity of around $27.4 million per year for the thirty-year project life.

Combined excess payments to Sahiwal and Port Qasim alone were estimated at $2.5 to $2.6 billion over the contract life.

These findings, if pursued, would support recovery claims against Chinese state-owned entities. They would also complicate Pakistan's relationship with its largest creditor and most important strategic partner. Hence the friendly phone call we are about to discuss.

CPEC is the trap that cannot be opened. Even if a future Pakistani government wanted to renegotiate or terminate these contracts, the legal, financial, and diplomatic consequences would be catastrophic. China is not a private investor. China is a state. China holds billions of dollars of Pakistani sovereign debt. China provides political support at the United Nations, the FATF, and other international forums. Confronting Chinese state-owned enterprises means confronting the Chinese state itself. No Pakistani government has been willing to do so. Probably none ever will.

The CPEC contracts run until approximately 2040 to 2045. Until then, Pakistani consumers will continue paying. Whether the plants run or not.

Detailed analysis at The CPEC Power Contracts: Terms, Costs, Why They're Worse Than 1994.

2020, the inquiry that was buried

On a day in April 2020, Pakistan came closer to genuine accountability than at any point in the previous twenty-five years.

A nine-member committee, headed by Muhammad Ali, the former chairman of the Securities and Exchange Commission of Pakistan, had spent months investigating the country's power sector. The committee had been commissioned by Prime Minister Imran Khan in early 2019 as part of his anti-corruption agenda. They had access to internal records of NEPRA, of the Central Power Purchasing Agency, of the IPPs themselves. They had interviewed officials, examined contracts, calculated payments.

Their report, 278 pages, organised, specific, devastating, was submitted to the Prime Minister in April 2020. It was, without exaggeration, the most thorough documentation of power sector corruption ever assembled in Pakistan.

What the report found

Among the documented findings:

IPPs were earning 50 to 70 percent annual profits, against a legal limit of 15 percent set by NEPRA.
16 IPPs from the 1994 policy had collectively invested Rs. 518 billion. They had earned profits exceeding Rs. 415 billion and paid dividends of over Rs. 310 billion. Some plants had achieved full payback within four years and operated at pure profit for the remaining twenty-five years of their contracts. Profit multiples up to 18 times original investment. Dividends up to 22 times.
2002-policy IPPs had received excess payments of Rs. 64.22 billion in the nine years before 2020, with total excess over remaining contract life projected at Rs. 209.46 billion.
CPPA-G made monthly payments to IPPs while NEPRA tariff calculations assumed quarterly payments, the two-month gap each quarter was paid for by consumers but never actually owed by the IPPs (the working capital scam).
Chinese CPEC entities had received excess payments of $2.5 to 2.6 billion through misrepresentation of construction timelines.
PM advisers Razzaq Dawood and Nadeem Babar were named as direct beneficiaries of IPP payments. Relatives of Khusro Bakhtiar and in-laws of Federal Energy Minister Omar Ayub Khan were named as beneficiaries.
Recommendation: forensic audit of all IPPs and recovery of approximately Rs. 1 trillion in excess profits.

The cabinet meeting

On April 21, 2020, the federal cabinet met to consider the report. Cabinet members named in the report, Razzaq Dawood, Nadeem Babar, Omar Ayub, Khusro Bakhtiar, were excluded from the meeting due to conflict of interest. The remaining cabinet members debated. They reached a decision. The press release issued afterward stated that the cabinet had decided to make the report public.

The release never happened.

In the days that followed, according to multiple journalistic accounts, a message arrived from a country that, in the careful language of Pakistani diplomacy, was referred to as "a friendly country." Prime Minister Khan was briefed by Asad Umar, a senior cabinet member, and by Omar Ayub Khan, the Federal Energy Minister whose own family members had been named in the report. The two officials reported on the concerns of the friendly country.

The decision to release the report was reversed.

The Rs. 1 trillion recovery was never pursued. The forensic audit was never conducted. The report was never officially released. The named beneficiaries continued in their positions. The IPPs continued collecting payments.

The identity of the friendly country

The "friendly country" was never named in any official statement. But the evidence pointing to the answer is overwhelming, and I will lay it out for you so you can make your own judgement.

The most damaging single category of findings in the report concerned Chinese CPEC plants. The $2.5 to 2.6 billion figure was attached to Chinese state-owned enterprises specifically. If the report had been made public and acted upon, the consequences for Chinese companies, and the global reputation of the Belt and Road Initiative, would have been severe.

China had previously expressed concerns to Pakistan about renegotiation of CPEC contracts. Officials had communicated, through diplomatic channels, that any such renegotiation would not be welcome.

When Imran Khan visited Beijing during this period, he was reportedly only able to meet President Xi Jinping on the final day of his four-day visit, an unusual diplomatic signal of displeasure that was widely noted at the time.

No other country had a comparable interest in the suppression of the report. The Western donors had been pushing for power sector reform for years. The Gulf states had no specific stake. The IMF was actively encouraging restructuring. Only one major bilateral partner stood to lose substantially from the report's findings.

I cannot prove definitively that the friendly country was China. I am not in a position to subpoena diplomatic cables. But every piece of available evidence points in one direction. And the pattern of Pakistani government behaviour after the report's suppression, the refusal to seriously raise CPEC IPP renegotiation, the exclusion of CPEC plants from all subsequent reform efforts, the continued payment of capacity charges to Chinese plants even as domestic IPPs were being terminated, confirms that whoever made the phone call had the kind of strategic leverage over Pakistan that only one country in the world possesses.

I have written about this in detail at The 2020 Inquiry Report That Was Buried.

What happened next

In the years since the report was buried, several things have happened.

The named beneficiaries continued in their positions until the PTI government fell in April 2022. None faced legal consequences. Several remain politically active.

The forensic audit was never conducted under the PTI government. The Shehbaz Sharif government that followed has also not conducted it.

The Shehbaz government did, however, conduct partial renegotiations of some 1994-era domestic IPPs in October 2024 and January 2025. Five plants were terminated. Fourteen others had their terms revised. The estimated saving was about Rs. 60 billion per year, meaningful but modest compared to the trillion-rupee scale of the buried report's findings. Notably, all of the renegotiated plants were domestic. None were Chinese.

The full report has, to my knowledge, never been published. 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.

Imran Khan, the Prime Minister who commissioned the report and then suppressed it, was removed from office in April 2022 and is now in prison on various charges. He has not, in his political comeback narrative, drawn attention to the suppressed report. Doing so would raise uncomfortable questions about why he buried it in the first place.

The Pakistani public, who paid for the system the report exposed and who has now paid an additional six years of capacity charges since the report was suppressed, has not been informed of any of this in clear terms. Until now.

That is one of the reasons this guide exists.

2024-2026, partial reform, full solar crackdown

The current chapter of the story is being written as I publish this. It has two parts.

The first part is partial reform. The Shehbaz Sharif government has, since taking office in 2022, conducted modest renegotiations of 1994-era domestic IPPs. Five plants terminated. Fourteen others restructured. Estimated annual saving: ~Rs. 60 billion, or about 3 percent of total capacity payments. Real progress, but real only at the margin.

Notably, the government has not released the 2020 inquiry report, has not conducted forensic audits, has not pursued recovery of excess profits, has not seriously raised CPEC renegotiation with China, has not privatised the distribution companies, and has actively damaged the solar transition.

The second part is the solar crackdown.

Faced with rising IPP-driven tariffs, ordinary Pakistanis between 2018 and 2024 did what any rational economic actor would do. They installed solar panels on their roofs. By 2024, Pakistan had approximately 7,000 megawatts of grid-connected rooftop solar and 13,000 megawatts of off-grid systems. Approximately six million Pakistani households had some form of solar installation.

This was extraordinary. It was one of the largest grassroots energy transitions in any developing country in human history. It was achieved without significant government subsidy, without major incentive programs, without sophisticated financing, through individual decisions made in millions of homes by people who had decided that paying Rs. 50,000 a month for electricity was no longer survivable.

From the perspective of climate policy, this was a triumph. From the perspective of the IPP system, it was a disaster.

Capacity payments are fixed by contract, Rs. 2 trillion per year, regardless of consumption. If half the country goes off-grid, the same Rs. 2 trillion has to be paid by the half that remains. Per-unit tariffs for grid users rise automatically. More users leave. The cycle accelerates. By late 2025, the math was becoming impossible. Within five to seven years, on the existing trajectory, grid demand would fall to a level where the capacity payments could not be funded.

The Pakistani government had three options:

Restructure the IPP contracts so the obligations would shrink.
Subsidise the difference from other revenues.
Stop the solar exodus by punishing the people leaving.

The government chose option three.

In February 2026, NEPRA introduced new Prosumer Regulations. Net metering on a one-to-one basis was ended. Solar households now export at approximately Rs. 11 per unit while paying approximately Rs. 48 per unit for any grid imports. The licensing exemption for systems under twenty-five kilowatts was removed. Licensing fees of approximately Rs. 1,000 per kilowatt were introduced. Capacity charges remained applicable on baseline grid consumption, meaning even solar households continued to pay the IPP capacity charges that were the original problem.

The state was telling citizens, in the clearest possible terms, that the obligations of the IPP system were not negotiable. The contracts would be honoured. The capacity payments would continue. If citizens tried to escape through individual action, the rules would change to bring them back.

This was a revealing decision. It told us where the loyalties of the Pakistani state actually lie. They lie with the contractual structures that channel money to a small number of beneficiaries, domestic and foreign. They do not lie with the broader population whose interests are being sacrificed to maintain those structures.

If you wanted to understand the politics of contemporary Pakistan in a single policy decision, the 2026 Prosumer Regulations would be a good place to start. Detailed analysis at Should You Install Solar in Pakistan in 2026? and The Solar Crackdown.

Who profits, the forty families

Pakistani electricity is, in its commercial heart, an industry dominated by approximately 40 business families. This is not a metaphor. It is documented in IPP ownership records, NEPRA filings, and stock exchange disclosures.

I will not profile all forty here, that takes its own pillar, The 40 Families Who Own Pakistan's IPPs. But the ones whose footprint is large enough to define the system include the Mansha (Nishat) group, the Dawood / Engro complex, the Sharif family (through Chiniot Power), Nadeem Babar's Orient and Saba ventures, the Saifullah family of KPK (Saif Power), the Tareen group (JDW bagasse), the Sapphire Group, the Atlas Group, the Habibullah Group, the Saigol family, and the Habib family.

What binds these families together is not ideology or politics. They are spread across PML-N, PPP, PTI, and independent affiliations. What binds them is a shared structural relationship to the Pakistani state, a relationship in which their commercial interests are protected by contracts, regulations, and political arrangements that ordinary citizens cannot access.

It is not that being rich is wrong. It is not that owning businesses is wrong. It is not that earning profits is wrong.

What is wrong is how a small number of families came to occupy a position where they receive guaranteed, dollar-indexed, government-protected returns from contracts that ordinary Pakistani citizens had no voice in approving, and that nobody now seems able to undo.

Pakistan has 240 million people. Forty families are receiving the bulk of the private share of capacity payments. That works out to a population-to-beneficiary ratio of roughly six million to one.

That is the system. It did not arrive accidentally. It was built, through specific decisions, in specific moments, by specific people, and it has been protected by every government since.

Who pays, the textile worker, the printer, the family

Behind the macro numbers, trillions, billions, percentages, are specific lives.

The 700,000 textile workers who lost their jobs in the past few years are not statistics. They are families. The factory owner whose family business closed is not collateral damage. The middle-class family paying twenty-five percent of household income on electricity is not an acceptable cost of doing business.

In the year 2000, Pakistan and Bangladesh had roughly equivalent textile exports, around five billion dollars each. By 2024, Bangladesh exported $47 billion. Pakistan exported $16.5 billion. Bangladesh grew nine-fold. We grew three-fold. We were ahead. We are now far behind.

Bangladesh did not have the 1994 Power Policy. Bangladesh did not sign CPEC contracts at twenty-seven to thirty-four percent dollar returns. Bangladesh provided its industry with cheap, reliable electricity. Pakistan provided its IPP owners with guaranteed dollar-indexed returns.

The result is the difference between $47 billion and $16.5 billion. The difference is the price Pakistan paid for the IPP system. The difference is what we gave up so that forty families could earn returns the rest of the world considered extraordinary.

When you next see a label that says "Made in Bangladesh," take a moment to think. That product could have been made in Faisalabad. The worker who sewed it could have been from Multan. The dollars that came back as exports could have flowed into our reserves. The jobs could have been ours.

They are not ours. We gave them away. Not because we lacked the workers, the cotton, the factories, the skill. We gave them away because we made our electricity more expensive than theirs.

Faisalabad once called itself the Manchester of Pakistan. Today, more than 1,000 small and medium textile units in Faisalabad have shut down in just the past two years. In Punjab as a whole, at least 187 textile mills have closed. Roughly 700,000 jobs lost. Cotton production has fallen from 15 million bales to 5.5 million, a 63 percent collapse in less than two decades.

I have written about Faisalabad in detail at The Manchester That Closed Down.

For households, the picture is similar. In 1994, when the original IPP contracts were being signed, an average middle-class Pakistani household paid Rs. 500 to Rs. 800 per month for electricity, about 2 to 3 percent of household income. By 2024, that same household, earning roughly Rs. 100,000 to Rs. 130,000 per month adjusted for inflation, was paying Rs. 15,000 to Rs. 30,000 per month for electricity. Twelve to twenty-three percent of household income.

For poorer households, the picture is worse. A working-class household earning Rs. 40,000 per month often has electricity bills of Rs. 8,000 to Rs. 15,000. Twenty to forty percent of household income. Just for the lights.

These are not theoretical numbers. This is what is happening, right now, in tens of millions of Pakistani households, every month. The tuition gets cancelled. The protein twice a week becomes once a month. The marriage saving is depleted. The doctor visit is delayed. The shoes wait.

Multiply this across 40 million households. You begin to see what the IPP system actually does. It does not just transfer money from consumers to producers. It transfers human possibility from the bottom to the top. It takes opportunities from working-class children in Sahiwal and converts them into dividends for shareholders in Karachi, Dubai, and Beijing.

There is a moral question buried in this. I will state it plainly. Is it just for a society to structure itself in a way where, every month, millions of children have their futures slightly diminished so that a small number of already-wealthy families can earn returns on contracts signed before those children were born?

I do not believe it is. I do not believe most Pakistanis, if asked the question in those terms, would believe it is. The system continues because the question has not been asked in those terms. It has been hidden behind technical language about tariffs, circular debt, and capacity factors. The technical language obscures the moral reality.

The moral reality is what I have just described.

The architecture of no escape

After everything I have read and considered, the most disturbing realisation that emerges is this.

There is no individual escape from the IPP system. The contracts are structured so that whatever route Pakistanis take to reduce their exposure, the system has been adjusted to keep them paying.

Citizen strategy	Government response	Net result
Reduce consumption below 200 units	Lifeline tariff exists but is restrictive; exceeding once removes protection for 6 months	Limited relief
Install net-metered solar	Buyback rate cut; licensing fees added (2026)	Economic case weakened
Go fully off-grid	Capacity charges still apply if any grid connection retained	Partial escape only
Use captive power for industry	Gas tariff hikes for captive plants; gas levies added	Captive power becomes expensive too
Switch to hybrid systems	New license required for hybrids	Bureaucratic burden
Move to KPK or Balochistan with cheaper local generation	Federal tariffs apply uniformly	No relief

This is not accidental. The system has been designed, through thirty years of regulatory adjustments, tariff structures, and contract provisions, to ensure that the obligation to pay IPP capacity charges flows through to consumers regardless of how those consumers attempt to organise their consumption.

Whatever Pakistanis do, the system has been engineered to ensure that the two trillion rupees gets paid. The legal framework, the regulatory structure, the tariff design, all of it works together to make sure the obligations of approximately one hundred years of contracts cannot be evaded by individual citizen action.

The only way out of the trap, in the end, is collective action. Termination or restructuring of the contracts. This requires political will at the highest level. It requires confronting the families who benefit, the regulators who protect them, the bureaucracy that administers them, and, in the case of CPEC, a foreign superpower.

No Pakistani government in thirty years has been willing to do all of this simultaneously. Some have tried bits of it. None has tried all of it. The structural reasons why none has tried all of it are themselves a political analysis I have written at length elsewhere.

But the simple fact, for now, is this. There is no solar panel large enough to escape this system. There is no efficiency improvement clever enough to outwit it. There is no consumption pattern disciplined enough to avoid it. The only solution is political. The only solution is collective.

The only solution is to break the contracts that bind us.

The way out, and why it is hard

After ten chapters of bad news, you have a right to ask: is there a way out?

The answer, despite everything I have described, is yes.

The way out has been documented. It has been costed. It has been validated by international examples. It is sitting in technical reports waiting for political will to implement it.

The reason it has not been taken is not because it does not exist. The reason is that taking it requires confronting powerful interests, and no Pakistani government in thirty years has been willing to do all of the necessary confrontations simultaneously.

Let me describe what the way out looks like. Then I will describe, honestly, why it is so difficult.

The ten steps

Step	Action	Confronts
1	Convert all IPPs to take-and-pay contracts	40 business families and their political networks
2	Conduct full forensic audits of all 1994 and 2002 policy IPPs	Beneficiaries of past payments, including political families
3	Pursue legal recovery of identified excess profits (~Rs. 1 trillion per 2020 report)	Pakistan's largest commercial groups
4	Open state-level negotiations with China for CPEC IPP restructuring	The Chinese government
5	Privatise the distribution companies through transparent competitive processes	40,000 DISCO employees and political patrons
6	Operationalise the Competitive Trading Bilateral Contract Market (CTBCM)	The IPP-DISCO-government nexus
7	Eliminate dollar indexation in all future contracts	Foreign investor expectations
8	Reverse the 2026 Prosumer Regulations and adopt fair pricing for solar prosumers	Further short-term grid revenue loss
9	Reform NEPRA governance, independent appointments, cooling-off periods, public verification	NEPRA's own self-protection instincts
10	Hold accountable, through legal processes, those named in the 2020 report	The entire political-business establishment

The combined effect of all ten steps would be transformative. Estimated annual savings: Rs. 1.5 to 2 trillion. Average household electricity bills could fall by 40 to 50 percent. Industrial competitiveness could be restored. The textile sector could begin to recover. The current account could improve as exports rise. The savings could fund the social programs, education, health, water, infrastructure, that have been crowded out by power sector subsidies for two decades.

All of this is achievable. None of it is fantasy.

Why none of it has happened

Each step on the roadmap requires confronting a specific powerful interest. Each individual confrontation is achievable. A determined government, with public support, could win any one of them. The problem is that all ten need to happen, more or less simultaneously, to break the system as a whole. Doing only one or two at a time allows the others to mobilise resistance, organise media campaigns, file court cases, and ultimately stall the broader reform.

Doing all ten at once requires a level of political coherence that no Pakistani government has demonstrated in thirty years.

In my judgement, breaking the IPP system would require five conditions to be present simultaneously.

First, a Prime Minister with overwhelming public mandate, at least 60 percent of the popular vote in a meaningful election. Without strong democratic legitimacy, the political costs of confrontation cannot be sustained.

Second, a Prime Minister with no personal financial exposure to the IPP system. No family power plants. No business partnerships with named beneficiaries. No spouse or children in roles that benefit from the existing arrangements.

Third, at least the tacit support, or honest neutrality, of the military establishment. Pakistan's military has historically had financial interests in the power sector through Fauji Foundation and related entities. A reform agenda that does not have at least the establishment's cooperation will be undermined long before it reaches its goals.

Fourth, a willingness to absorb significant short-term political and economic pain. Stock markets will fall. The rupee will weaken. International ratings agencies will react. Foreign investors will threaten arbitration. None of these can be allowed to reverse the reform agenda. The Prime Minister has to be willing to govern through six to twelve months of intense criticism, market volatility, and elite backlash.

Fifth, the speed and coherence to move on all major fronts within the first ninety days of taking office. After ninety days, the political opposition will have organised, courts will be issuing stay orders, foreign governments will be applying pressure, and the establishment will be growing uncomfortable. The window for transformative action is short.

Pakistan has not had a leader who satisfied all five conditions in living memory. We have had popular leaders. We have had honest leaders. We have had decisive leaders. We have not yet had a leader who was all of these things, at once, at the right moment, with the right mandate, and with sufficient institutional support to act.

Imran Khan came closest. He understood the problem. He commissioned the report. He had a clear public mandate. He had the rhetorical platform. He failed because, when the moment of confrontation came, he chose accommodation. He was unwilling to break with China. He was unwilling to prosecute his own cabinet members. He was unwilling to absorb the establishment's discomfort. So he buried the report and continued.

Whether such a leader will emerge, and when, I cannot predict. The structural problems described in this guide are now severe enough that some kind of crisis is approaching. The grid will face a financial reckoning within the next five to seven years on its current trajectory. At some point, the cost of doing nothing will exceed the cost of doing something. When that point arrives, the question will not be whether reform happens, it will be whether reform happens through orderly political action or through chaotic collapse.

I hope, for all our sakes, that it is the former. But hope, by itself, is not a strategy.

What you can do

When citizens read articles like this, the most common response is to feel overwhelmed. The system seems too big. The interests too powerful. The history too long. What can one person do against a thirty-year structural problem?

The answer is more than you might think.

Movements that change countries have always been built from individual citizens choosing to act. The civil rights movement in the United States. The anti-apartheid struggle in South Africa. The Polish Solidarity movement. Every successful reform movement in human history has been built from ordinary people who decided that something they had been told was unchangeable was, in fact, going to be changed.

Pakistan is not a hopeless case. Pakistanis are not weak. The information that has been hidden for thirty years is now becoming public. Once enough people know what has been done, the political possibilities shift. The way out becomes a question of when, not whether.

Here is what each of us can do, starting now.

Become informed. Read this guide. Read the source material it cites. Read the moral case, the capacity-payment explainer, the solar guide. Read the IEEFA reports. Read Dawn's investigative pieces. The point is not to become an expert. The point is to develop your own judgement, based on primary sources, so that you cannot be deceived by official narratives.

Share what you know. Forward this guide to ten people. Encourage each of them to forward it to ten more. Discuss it at your dinner table. Bring it up at family gatherings. Mention it at office tea breaks. Argue about it. Disagree with parts of it. Make people think. The goal is to make the basic facts of the system common knowledge.

Make political support conditional. The next time a politician, any politician, any party, asks for your vote, your endorsement, your donation, ask them about the IPP system. Will you publish the 2020 report? Will you conduct the forensic audit? Will you pursue recovery of excess profits? Will you raise CPEC renegotiation at the highest level? Will you reverse the 2026 Prosumer Regulations? Make support conditional on specific commitments with specific timelines. Do not accept generalities.

Treat this as non-partisan. No party gets a pass on this issue. PPP signed the original 1994 contracts. PML-N expanded the system and signed CPEC. PTI commissioned and buried the inquiry. The current government has terminated five plants while protecting forty more. Citizens who treat this as partisan are letting themselves be played. The system survives because it has made sure no party can be blamed in isolation, and therefore none can be effectively challenged. Make energy reform a non-partisan demand on every political force.

On your own roof, do what makes sense. Solar still makes economic sense for most Pakistani households despite the 2026 rules, see the full guide. Energy efficiency in your home and business reduces both your bill and your dependence on the grid. These are individual actions that, multiplied across forty million households, create real political pressure on the system.

Be patient and insistent. The IPP system was built over thirty years. It will not be dismantled in three. The first task is to make the system politically visible, to bring it from the technical periphery into the centre of public conversation. This guide is one contribution to that task. There will need to be many more. The second task is to keep pressure consistent across electoral cycles. The third is patience combined with insistence. Patience because the system will not change quickly. Insistence because each year of delay costs another two trillion rupees.

In ten years, if enough citizens choose to act, Pakistan can have a different power sector. Tariffs forty to fifty percent lower. Industries that compete with Bangladesh and Vietnam. Households that can afford to live in dignity. A solar revolution that is celebrated rather than punished. An accountable regulator. Honoured forensic auditors instead of buried reports. Restructured contracts instead of dollar-indexed tribute payments to forty families.

All of this is possible. None of it is automatic. It requires choices made by ordinary Pakistanis to demand a different country, and to keep demanding it until the demands are met.

That is what every citizen can do.

In closing

This guide has covered thirty years of Pakistani power sector history in seventy minutes of reading time. There is more in the books I have written. There is more in the source materials those books cite. There will always be more.

But the basic story is now in your hands.

Decisions made in 1994, 2002, 2006, and 2014, by people you did not elect, in negotiations you were not party to, created a system that, every month, transfers approximately Rs. 175 billion from ordinary Pakistanis to a small number of business families and Chinese state-owned enterprises. The transfer is legal. It is documented. It is hidden in plain sight, behind the technical language of capacity payments, dollar indexation, and tariff structures.

The transfer continues because the people who pay for it have not been told about it in clear terms. Until they are told, until enough of them know, the system is safe. Once they are told, once enough of them know, the system becomes vulnerable. Politicians who defend it lose credibility. Bureaucrats who protect it face questions. The narratives that have shielded the architecture for thirty years stop working.

That is why information matters. That is why this guide exists.

Pakistani citizens have endured this system for thirty years. They have paid bills that strangled their household budgets. They have watched factories close. They have lost jobs. They have seen their children's opportunities reduced. They have done this without ever being told the full truth about why.

Despite all of this, they have not given up on the country. They have continued to work. To raise families. To pay taxes. To vote, even when voting felt futile. To install solar panels with their own money rather than abandon their homes. To keep believing, against significant evidence, that things could get better.

That patience and that perseverance is, in my view, the most important resource Pakistan has. The least we can do, as citizens, is to deserve this resilience. To work toward a country that is, in modest ways, a little more honest with the people who have given it so much.

The contracts were signed in our name. The bills come to our address. The truth, at minimum, belongs to us.

Thank you for reading. Pass it on.

WHAT TO DO TONIGHT

Forward this guide to five people who pay an electricity bill in Pakistan. Discuss it at your next family meal. Bring it up at office tea breaks. The goal is not to convert anyone to a single political position. The goal is to make the basic facts of the system common knowledge, so that the next time a politician promises "historic tariff reductions," every Pakistani knows what to ask, and the next time a regulator claims "consumer interest has not been compromised," every Pakistani knows enough to laugh.

, Asad Baig, Lahore, April 2026

Frequently asked questions

What is the cause of Pakistan's electricity crisis? The single largest cause is contractual obligations to independent power producers (IPPs) under agreements signed between 1994 and 2018. These contracts guarantee dollar-indexed returns of 15 to 34 percent regardless of whether plants produce electricity. Capacity payments under these contracts cost Pakistan approximately Rs. 2 trillion per year and account for roughly 40 percent of every electricity bill.

Who signed the original 1994 IPP contracts? The Bhutto government signed the 1994 Power Policy and the contracts that flowed from it. But it was a collective bureaucratic-political product involving the Prime Minister's Secretariat, the Ministry of Water and Power, the Privatisation Commission, WAPDA leadership, the federal cabinet, and senior civil servants, many advised by foreign consultants. No single individual is solely responsible.

What was the 2020 Power Sector Inquiry Report? A 278-page report submitted in April 2020 by a nine-member committee headed by Muhammad Ali, former chairman of the Securities and Exchange Commission of Pakistan. It documented systematic excess profits by IPPs (50-70% annual returns against a 15% legal limit), inflated capital costs, the working capital scam, and named specific government officials as direct or indirect beneficiaries. The cabinet voted to publish it; the publication was reversed after a phone call from a "friendly country."

Which "friendly country" buried the 2020 report? The friendly country was never officially named. Multiple journalistic accounts and the pattern of subsequent Pakistani government behaviour, particularly the exclusion of CPEC plants from all reform efforts, point overwhelmingly to China. The 2020 report's most damaging single category of findings concerned Chinese CPEC plants ($2.5-2.6 billion in excess payments documented).

Why are CPEC IPPs more expensive than 1994 IPPs? The CPEC contracts (2014-2018) guaranteed 27 to 34 percent return on equity in dollars, compared to 15 to 18 percent under the 1994 policy. Pakistan accepted these terms because Western financiers were unwilling to fund coal projects, the World Bank had policy restrictions, and China offered money, speed, and no conditions. The result is that Chinese state-owned enterprises hold contracts that, by international comparison, are extraordinary for sovereign-guaranteed thermal projects.

How much would my electricity bill fall if capacity payments were eliminated? By approximately 60 percent. From around Rs. 48 per unit to approximately Rs. 19 per unit, according to International Growth Centre estimates (June 2025). A household paying Rs. 50,000 a month would pay roughly Rs. 20,000.

Has any government tried to reform the IPP system? The current Shehbaz Sharif government has terminated 5 IPPs and renegotiated 14 others since October 2024, meaningful but modest progress, saving about Rs. 60 billion per year against a Rs. 2,000 billion problem. The 2020 inquiry report has not been released, the recommended forensic audit has not been conducted, and CPEC IPP renegotiation has not been seriously raised.

What is the 2026 solar crackdown? In February 2026, NEPRA introduced new Prosumer Regulations that ended one-to-one net metering, cut the solar buyback rate to approximately Rs. 11 per unit, required licensing for all systems including those under 25 kW, and added per-kilowatt fees. The official rationale was grid stability. The unofficial rationale was to slow the exodus of households from the grid so that fixed IPP capacity payments could continue to be funded. Six million Pakistani households had gone solar between 2018 and 2024 with their own money.

Can I escape the IPP system by going off-grid? Not entirely. The system has been designed so that whatever route citizens take, solar, off-grid, reduced consumption, captive power, hybrid systems, moving to KPK or Balochistan, capacity charges find a way to reach them, either directly or through socialised costs on remaining grid users. The only real escape is collective political action to restructure the contracts.

Sources and notes

Every claim in this guide is drawn from publicly available material. Primary sources include:

Power Sector Inquiry Report 2020, Government of Pakistan, committee headed by Muhammad Ali, former SECP Chairman (ARY News mirror)
NEPRA State of Industry Reports 2015-2024, National Electric Power Regulatory Authority
CPPA-G Annual Reports, Central Power Purchasing Agency Guarantee Limited
IEEFA Reports on Pakistan Power Sector by Haneea Isaad (2024-2025)
International Growth Centre, Sustainable Pakistan Growth Brief (June 2025)
Institute of Strategic Studies Islamabad, Issue Brief on Pakistan's Energy Crisis (October 2024)
Dawn, Most of IPPs owned by 40 Pakistani families, groups (22 July 2024)
Dawn, Top NEPRA officials hike salaries without cabinet nod (17 February 2025)
Dawn, New payment model for IPPs without profit bonanza (2 November 2024)
The Express Tribune, 187 mills shut down in Punjab (14 February 2025)
The Express Tribune, PM unveils power tariff cuts for industry, farms (24 October 2025)
Pakistan Today / Profit, Energy task force chairman allegedly owes Rs. 800m to SNGPL (14 January 2019)
The News, What is really going on in power sector? (2 April 2017)
Arab News, Pakistan announces Rs. 7.41 per unit cut in power tariff (April 2025)
The Diplomat, China in Pakistan's Power Sector: The Hidden Costs (January 2025)
FIA challan against Sharif family members (November 2020)
NAB list of 71 politicians and bureaucrats (October 2018)
Pakistan Bureau of Statistics, Textile export data 2000-2024
APTMA (All Pakistan Textile Mills Association) public statements 2023-2025

A complete source list is in the books The People's Bill and My Position.