Pakistan: Inefficient power plants worsening circular debt crisis, report says

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A recent study by an Islamabad-based think tank has pointed to obsolete and inefficient power plants as key contributors to Pakistan’s circular debt crisis, Dawn reported. The report, compiled by Engineer Arshad Abbasi of the Centre for Research and Security Studies (CRSS), sheds light on the challenges plaguing Pakistan’s power sector, attributing much of the blame to deliberate negligence by officials.

Titled ‘Circular Debt Reduction Is Possible In a Single Click to Save Pakistan from Financial Catastrophe and Destabilisation,’ the report highlights the deliberate non-use or under-utilisation of efficient power plants, alongside continued payments to highly inefficient and outdated ones, as central issues in Pakistan’s energy sector circular debt. This situation, compounded by high capacity payments and a lack of retirement policies for obsolete plants, has trapped Pakistan in a cycle of debt and decay, as reported by Dawn.

The report draws attention to specific examples of 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. Despite remaining largely idle for the past two years, these plants have continued to claim significant capacity charges, further burdening Pakistan’s economy. Highlighting governance issues within entities like K-Electric and malpractices within the public and private power sectors, the report questions whether these practices symbolize fraud and exploitation at the expense of Pakistan’s economy and its citizens.

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It emphasises the urgent need for holistic reforms to alleviate financial strain and ensure long-term sustainability. Furthermore, the decline of hydropower, from a 60 per cent share in 1991 to 29 per cent today, exacerbates Pakistan’s energy challenges. The absence of major hydroelectric projects like the Kalabagh Dam has left the nation reliant on costly imported fuels, further straining finances. Political controversies surrounding hydroelectric projects underscore the need for consensus-driven decision-making to ensure energy security and economic resilience, Dawn reported.