Power sector is by far the most poorly performing sector of the economy – a sector that compromises the competitiveness of our industries, those that cater solely to domestic consumption as well as those engaged in exports, undermines the quality of life of the general public and last but not least is a major contributor to the burgeoning government debt.

One International Monetary Fund (IMF) programme after another, and the country is currently on its twenty-fourth programme (on average three years each) as well as after numerous multilateral sectoral loans and technical assistance estimated at billions of dollars the power sector remains in dire straits.

Approval of contracts by civilian administrations (Benazir Bhutto as well as Nawaz Sharif) and Musharraf’s military government, envisaging capacity payments, repatriation of profits as well as import of fuel by private sector independent power producers (IPPs) has added more fuel to the blazing fire of appalling poor sectoral management.

Additionally, without considering the sector holistically, the idea of clean and cheap energy (solar/wind) was seized by successive cabinets who proceeded to provide monetary and fiscal incentives to mainly middle to upper middle income earners who set up solar panels on their rooftops.

This reduced demand for electricity from the national grid, thereby raising the IPP capacity payments, necessitating higher tariffs for consumers reliant on the national grid.

The Fund documents dated 10 October 2024 maintain that the stock of power payment arrears – circular debt (CD) – stood at 2.794 trillion rupees (2.6 percent of GDP by end March 2024) while the government pledged to “keep energy tariffs in line with costs while we implement fundamental reforms to ease price pressures and shore up viability over the medium term.”

A structural benchmark for the ongoing loan is net-zero CD flow by the current fiscal year-end through a combination of measures that........

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