Paying More for Less: Payments and Profits in Pakistan’s Privatised Power Sector

As Pakistan looks to privatise its electricity distribution sector, this new report, developed by CICTAR in partnership with the Friedrich Ebert Stiftung (FES) and Public Services International (PSI), details the disastrous impacts of privatisation in the generation sector.

Pakistan’s electricity system is in crisis, not because of a lack of generating capacity, but because the policies implemented to attract the private sector into power generation have resulted in windfall profits, while delivered surging prices for households and businesses.

Since 1994 Pakistan has been locked into “power purchase agreements” (PPAs) that guarantee private power producers generous capacity payments when their plants sit idle. Over the last two years, capacity payments – paying companies not to generate power – have accounted for more than half the cost of consumer electricity tariffs – totalling PKR 1.8 trillion in 2024-25.

Despite an 86% increase in install generating capacity over the last decade, actual generation has increased by only 31% over the same period. Pakistan now has a surplus of fossil fuel-powered generating capacity – much of which regularly sits idle – generating capacity payment revenue for shareholders and rising costs for consumers. Private sector generation has actually declined over the decade, even as profits have surged, helped along by lavish tax incentives.