Govt Plagued by Miscalculated Electricity Agreements Causing Billions in Losses

Pakistan is finalizing a plan to address about Rs. 2.2 trillion ($14.4 billion) of debt the government owes to the energy sector, Bloomberg reported on Friday.

This liability has doubled in the past two years as power purchases outstripped demand.

The government is also planning to pay Rs. 400 billion in late fees to several electricity producers by June in a deal to cut power costs. According to the SAPM on Power, Tabish Gauhar, banks will be reportedly asked to restructure the remaining debt.

The government had previously pledged to make these payments by February.

The government buys nearly all of the electricity produced in Pakistan, and a surplus of production has forced the government to rack up massive debt. This is worsened by the fact that reducing energy sector liabilities is also one of the International Monetary Fund’s (IMF) conditions for providing Pakistan with a $6 billion bailout package.

According to the Bloomberg report, if this issue is not timely resolved, the debt in concern is expected to double to 4.5 trillion rupees by June 2023.

As a result, the government is now looking at buying all of Pakistan’s private fuel oil-fired power plants, including Hub Power Co.’s facility, at a one-time cost that will help save at least Rs. 300 billion on payments over the next seven years, Gauhar said in an interview.

He also said that electricity tariffs for end-users, including households and businesses, will likely rise over the next few years. “The government will, however, explore ways to boost efficiency and lower costs in order to ease the burden on consumers,” Gauhar added.