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Introduction
In 1987, the Government of Pakistan (GOP) with the assistance of the World Bank formulated its
long term strategy for development of the power sector in reliable power would spur economic
growth. With energy demand growing at 12 percent and supply at 7 percent per annum. Load
shedding was rampant with consequential output losses for industry and agriculture. It was
estimated that the annual gap of 2000 MW of electricity cost the country approximately $1
billion per year in lost GDP. Electricity was available to only 40 percent of the population and
per capita consumption of 404 kWh was only 4 percent of that in the United States and 24
percent of consumption in Malaysia.
IPPs
Pakistan had to catch up fast and the development of new capacity became the top priority, but
the Government of Pakistan (GOP) lacked the funds for infrastructure development.
Consequently, the private sector was invited to develop new generating capacity. It was
rationalised that the private sector would not only supplement public sector generation, it would
also mobilise additional equity and debt resources and improve the efficiency in the energy
sector.
The new energy policy was implemented in a period of high political volatility in the early
1990s. The first Benazir Bhutto government (elected in 1988) was dismissed by President
Ghulam Ishaq Khan in 1992. She was succeeded by Nawaz Sharif who initiated a number of free
market reforms and also signed Pakistans first IPP contract for the largest power sector project
with the Hub Power Company in
1992. Disagreements with the President led to the dismissal of this government also, and an
interim government was installed which held fresh elections in which the second Bhutto
government was elected in November 1993. During its tenure, the Bhutto government signed a
number of IPP contracts under the 1994 Power Policy and in June 1996, Pakistans first private
sector power plant, the Hub Power Company (Hubco) came into operation.
Current Situation
Currently the situation Installed capacity is as following .
a. Total installed capacity 20681 MW
b. WAPDA hydel 6,555 MW (31%)
c. WAPDA thermal power, 4829 MW
d. RPPs 365 MW
e. PAEC 665 MW
f. IPPs 7644 MW
Currently Production is 11500 MW and Demand is 15500 MWAdditional quantity is not being
produced due to lack fundsand circular debt problem.IPPs and Wapda owned plants also have
lost efficiency now only producing 50% of full capacity and even less.Production of additional
quantity will cause Govt to increase rates due to increase in thermal factor(variable costs of
electricity produced by thermal varies between Rs 12 to 19,while by Hydel variable cost is less
than Rs1).So the result is rampant load shedding, blow to agriculture and industry and high
Social cost.
Impacts of IPPs
Impacts of IPPs are both positive as well as negative, positive impacts include:
a. Enhanced the capacity of power sector
b. Supported the economic activity from 2000 to 2007
c. Provided a cushion time to built long term power projects
d. Provided vital support in short span of time
Negative impacts include:
a. Bulk tariff ceiling instead of competitive bidding resulted in high tariffs
b. Increase in Thermal component also contributed toward price hike ,i.e. 60%
c. Lack of transparency in contracts as discussed earlier
d. Since 2001 though it has supported eco activity but due to oil price hike and increase in
thermal factor it has caused following problems :
a) Higher power tariff causing inflation especially after 2005-2006
b) Costly export goods
e. Low performance by old plants has aggravated power shortage
f. IPPs are not environment friendly and cause lot of pollution