ISLAMABAD: The study by Islamabad-based think tank has blamed the obsolete and inefficientpower plants for circular debt crisis in the country.

The report by Centre for Research and Security Studies (CRSS) highlighted the challenges facing Pakistan’s power sector and criticised the officials for their deliberate negligence.

The report titled ‘Circular Debt Reduction Is Possible In a Single Click to Save Pakistan from Financial Catastrophe and Destabilisation’ has been compiled by Engineer Arshad Abbasi.

It has been noted that deliberate non-use or under-utilisation of the most efficient power plants and continued payments to highly inefficient and outdated power plants are at the heart of Pakistan’s energy sector circular debt.

High capacity payments, under-utilised efficient capacity and lack of retirement policies for obsolete plants compound the issue, trapping Pakistan in a cycle of debt and decay.

The report gave the examples of obsolete and inefficient power plants including the 1,250 MW Hubco Coal, 1,250 MW Sahiwal Coal (HSR) and 1,250 MW Port Qasim Coal power plants.

Both Hubco Coal and Port Qasim Coal plants have remained largely idle for the past two years, yet these independent power producers (IPPs) continued to claim at least 60pc capacity charges even if they do not produce a single unit.

The CRSS report said a collusion between the public and private power sector players continued to exploit the lacunas to the detriment of Pakistan’s economy and to the disadvantage of poor consumers.

As the circular debt has ballooned above Rs3,000 billion, posing a grave threat to the nation’s economic stability, this debt, fueled by unpaid subsidies, inefficiencies and systemic corruption within the distribution and production chain, underscores the pressing need for holistic reforms to alleviate financial strain and foster long-term sustainability.

“A significant factor contributing to the high cost of electricity, aside from inflated contracts with independent power producers (IPPs), is the deliberate non-use or under-utilisation of the most efficient power plants, while running highly inefficient, dated power plants which continue to worsen the situation,” the report said.

It highlighted governance issues within entities like K-Electric, where inefficiencies and malpractices exacerbated the energy crisis, prompting questions about whether these entities symbolised fraud.

Similar questions arise regarding the crushing policies and clauses of independent power producers.

The decline of hydropower, from 60pc share in 1991 to 29pc today, underscores a regression in Pakistan’s energy landscape.

The absence of major hydroelectric projects like the Kalabagh Dam has left the nation dependent on costly imported fuels, exacerbating financial strain.

Political controversies surrounding hydroelectric projects have further complicated the situation, highlighting the need for consensus-driven decision-making to ensure energy security and economic resilience.

Published in Dawn, May 16th, 2024