Pakistan Paid Rs2.94 Trillion for Power in 11 Months. Where Did the Money Really Go?

 

Pakistan booked nearly Rs2.94 trillion for power procurement over 11 months. The figure raises a deeper question about capacity costs, circular debt and who ultimately carries the burden of Pakistan's electricity system.

The Bill on the Table

I have looked at electricity bills in Karachi and gone back to the meter reading because the amount due seemed disconnected from the electricity consumed.

First come the units. Then comes the number that really matters: the amount payable.

Millions of Pakistani consumers perform some version of that calculation. They see expensive electricity and hear about capacity payments. Then they read about independent power producers, or IPPs, receiving enormous sums. It becomes easy to reach a conclusion: somebody is making a fortune while ordinary Pakistanis pay.

A figure circulating online appears to confirm the suspicion.

Pakistan reportedly spent almost Rs2.94 trillion on power procurement in only 11 months.

The number is broadly correct. What people are making it mean is another matter.

Energy Minister Awais Ahmad Khan Leghari told the National Assembly that Rs2.939 trillion had been booked for procurement of 115,206 GWh of electricity supplied to the national grid between July 2025 and May 2026. June billing had not been finalized when the information was provided.

At exchange rates prevailing during the period, Rs2.939 trillion was roughly $10.5 billion, not the $12 billion sometimes claimed online.

A much bigger correction is necessary.

The figure does not mean Pakistan handed Rs2.939 trillion in profits to private IPP owners. Nor does it represent capacity payments alone.

It represents the reported amount booked for procuring electricity supplied to the national grid during those 11 months.

Correcting the viral claim does not make Pakistan's electricity problem disappear.

It reveals a more disturbing one.

What Does Pakistan Pay for When It Buys Electricity?

A power station does more than sell units after they have been generated.

Pakistan's electricity market separates energy charges from costs associated with maintaining contracted generation capacity. CPPA-G's commercial arrangements distinguish between energy and capacity components when settling the power purchased from generators and transferring costs through the electricity market.

There is an economic reason for that structure.

A company investing hundreds of millions of dollars in a power station cannot necessarily finance the project if its entire return depends on how many units the grid happens to purchase years later. Long-term power contracts therefore allocate risks between investors and electricity purchasers.

The trouble starts when the assumptions behind those arrangements stop matching the electricity market.

NEPRA's January 2026 proceedings provide an extraordinary glimpse of the scale involved.

CPPA-G revised its projected calendar-year 2026 Power Purchase Price to approximately Rs3.186 trillion, or Rs25.32 per kWh, under the scenario considered by the regulator. CPPA-G also told NEPRA that previous IPP renegotiations had helped bring the projected power purchase price down from Rs27 per kWh in FY2024-25 to Rs25.98 in FY2025-26.

That is not Rs3.186 trillion of IPP profit.

It is something more complicated: the enormous cost structure required to purchase electricity through Pakistan's existing generation system.

The Consumer Never Sees This Machinery

I do not receive a CPPA-G settlement statement at home.

I receive an electricity bill.

Between the generator and that bill sits an elaborate system of tariff calculations.

Pakistan establishes base tariffs for different consumer categories. Monthly fuel charge adjustments respond to variations in generation costs. Quarterly adjustments can account for changes including capacity-related costs.

There is also a debt-service surcharge connected with power-sector debt. Taxes enter the final bill separately. The IMF's 2026 program documents describe this tariff and cost-recovery architecture while noting protections available to vulnerable consumers.

So blaming every rupee on IPPs produces a satisfying villain but poor economics.

Some financial pressure begins with generation contracts. Distribution performance creates another problem. Financing accumulated liabilities adds costs of its own.

When the electricity system fails to recover enough money to meet its obligations, the difference does not evaporate.

Someone absorbs it.

Sometimes the consumer does.

At other times, the federal budget enters the room.

The Taxpayer Pays Too

This is where the argument about "people's money" becomes much harder to dismiss.

The Ministry of Finance's Fiscal Policy Statement 2026 records actual power-sector subsidies of Rs1.2115 trillion in FY2024-25, compared with a budget estimate of Rs1.190 trillion.

Within that total, Rs752.8 billion was recorded under the IPP subsidy category. The original budget estimate for that category had been Rs215 billion.

That is a striking fiscal deviation.

It is not proof that Rs752.8 billion was stolen. Nor does the classification tell us that every rupee became profit for private shareholders.

It tells us something else.

Part of the electricity sector's financial burden moved onto the federal budget. The subsidy figure alone does not establish why every liability arose or who ultimately benefited from each rupee.

The FY2026-27 federal budget continues substantial power-sector support, allocating Rs830 billion for power subsidies.

The Pakistani household therefore encounters the electricity problem through more than its monthly bill.

The taxpayer can carry part of it too.

Circular Debt Shows Where the System Breaks

Few phrases in Pakistan's economic vocabulary sound more harmless than "circular debt."

The reality is anything but harmless.

When revenues collected through the electricity chain fail to cover obligations generated within it, unpaid amounts accumulate. Arrears move through the system. Financing those obligations can create further costs.

Pakistan ended June 2025 with power-sector circular debt of about Rs1.614 trillion, according to the Power Division. The ministry attributed the improvement during that year partly to better DISCO performance and the waiver of late-payment interest following negotiations with IPPs.

Power Division data subsequently reported for June 2026 put circular debt at approximately Rs1.675 trillion, a net increase of around Rs61 billion during FY2025-26.

The underlying movements were much larger.

Reporting based on Power Division figures attributed Rs262 billion of gross buildup to DISCO loss inefficiencies and another Rs64 billion to under-recoveries. Other additions and offsets ultimately produced the much smaller net increase.

That distinction exposes a weakness in the popular IPP narrative.

A generation contract cannot explain why a distribution company fails to collect money owed by customers.

Distribution losses do not explain every contractual capacity obligation either.

Pakistan has several problems wearing the same electricity bill.

The Government Has Renegotiated IPP Contracts

Any fair assessment must acknowledge what has changed.

The government has renegotiated power agreements.

The Power Division says those negotiations have eliminated an estimated Rs3.4 trillion of future financial burden on consumers and the exchequer. It also says planned generation projects that were no longer considered necessary were removed from the pipeline.

The wording matters.

Rs3.4 trillion is an estimate of avoided future costs. It is not Rs3.4 trillion in cash that suddenly appeared in the Treasury.

Still, dismissing the renegotiations would be equally misleading.

NEPRA's subsequent proceedings provide regulatory evidence that renegotiations and terminations were incorporated into power-purchase-price calculations. CPPA-G linked those changes to a reduction in the projected power purchase price.

Something has changed.

The harder question is whether the structure has changed enough.

Pakistan Has Plenty of Generating Capacity. Demand Is Changing.

Pakistan had 49,651 MW of installed electricity-generation capacity by the end of March 2026, according to the Pakistan Economic Survey. Electricity generation during July to March stood at 92,835 GWh.

Installed capacity by itself tells us little about waste.

A reliable electricity system needs reserve capacity. Power stations require maintenance, and peak demand can rise far above average demand.

Pakistan's difficulty lies partly in matching long-term capacity obligations with the electricity consumers actually purchase from the grid.

Something important is now happening on the demand side.

During NEPRA's proceedings for the 2026 power-purchase forecast, CPPA-G said the pace of solarisation was close to the organic increase in electricity demand, effectively offsetting that growth. NEPRA also recorded that net generation during January to September 2025 was only 0.51 percent higher than during the corresponding period in 2024.

That creates a difficult economic problem.

Many power-system costs do not disappear simply because consumers purchase fewer units from the grid. If grid sales stagnate while substantial fixed obligations remain, recovering those costs becomes harder unless tariffs, contracts or the structure of the market adjusts.

I see the divide clearly in Karachi.

A household that can finance rooftop solar has an escape route from expensive grid electricity. A family without the capital to install it remains much more dependent on the system.

The economics of electricity then starts colliding with the economics of inequality.

So Is the Government Wasting People's Money?

Partly. But "waste" is too crude a description of the Rs2.94 trillion figure.

Buying electricity is not waste.

Paying for economically necessary reserve capacity is not inherently wasteful either.

The evidence supports a charge of systemic inefficiency much more comfortably than a claim that Rs2.94 trillion was squandered.

Waste requires us to identify expenditure that produced little or no legitimate value. The power-procurement number by itself cannot establish that.

The stronger case begins elsewhere.

If generation planning leaves the country carrying capacity that its economy cannot efficiently use, consumers can bear unnecessary costs.

Weak bill recovery creates another hole. Distribution losses beyond efficient levels deepen it.

When accumulated liabilities require financing, yesterday's power-sector problem can become tomorrow's fiscal obligation.

The Ministry of Finance approved a government guarantee of approximately Rs659.646 billion as part of arrangements associated with Rs1.225 trillion in circular-debt financing intended to settle Power Holding Limited debt and overdue payments to power producers.

At that point, the problem no longer sits between a generator and an electricity distributor.

The state enters.

So does the taxpayer.

The IMF Cannot Fix This With Tariffs Alone

Pakistan's IMF program is sometimes reduced to one sentence: the IMF wants electricity prices increased.

The documents describe a broader problem.

The IMF requires cost-recovery measures because selling electricity below recoverable system costs allows new liabilities to accumulate. Its May 2026 review also stresses structural reforms intended to reduce underlying electricity costs and improve sector efficiency.

That distinction matters.

Cost-reflective tariffs can help stop new financial holes from opening.

They cannot make an inefficient electricity system efficient.

If excessive losses survive while recoveries remain weak, the financial pressure remains. Poor generation planning can deepen it.

Raising tariffs may determine who pays for those failures.

It does not remove them.

The Rs2.94 Trillion Question

The viral claim began with a genuine number and produced the wrong question.

Pakistan did not simply hand "$12 billion to IPPs."

The government reported Rs2.939 trillion booked for procuring 115,206 GWh supplied to the grid over 11 months. Behind that number sit generation costs and contractual capacity obligations. Distribution failures enter elsewhere in the system, while accumulated debt creates another burden.

Some reforms are working through the machinery. IPP agreements have been renegotiated. Projected power-purchase costs have fallen from earlier levels.

Yet Pakistan still ended FY2025-26 with circular debt of around Rs1.675 trillion.

That is why I think public anger should not be dismissed merely because the viral "$12 billion to IPPs" claim is misleading.

People may be wrong about where every rupee goes.

They are not wrong to ask why the system remains so expensive.

Consumers are entitled to know what produces each rupee of the power-purchase price. How much pays for electricity actually generated? How much arises from capacity obligations?

Distribution inefficiency belongs in the reckoning too, but it is a different failure.

Pakistan has spent years asking who steals electricity.

Another question deserves the same persistence.

Who should be accountable when weak recovery and costly legacy obligations move through the power system until the bill finally reaches people who had no role in creating them?

Bad planning belongs in that reckoning too.