As new largely coal-fired plants come online, Pakistan is expected by 2023 to have 50pc more power capacity than currently needed.
Because the government must repay loans taken to build the plants and has signed contracts to buy their power, the overcapacity is producing costs “the government has to pay to the power producers under binding contracts, regardless of actual need”, Mr Gauhar said.
“Our fixed-capacity charges have gone through the roof,” he added. Those costs currently stand at Rs850 billion a year, but will rise to almost Rs1.45 trillion a year by 2023 as new largely coal-fired power plants still being built come online, he said.
Large-scale construction of new power plants — largely coal-fired ones funded by China — has dramatically boosted energy capacity.
So capacity payment will surge to 1.45 trillion in next 2 years. Amazing negotiation.