🔳 This is not Pakistan-China friendship. In the name of friendship, it increasingly looks like a classic case of Economic Hitmanship: an economic trap in which relatively cheaper projects are sold at inflated costs, profits are extracted in dollars, and a country is financially locked into long-term, questionable agreements, such as 30-year contracts. Readers are encouraged to understand the term Economic Hitmanship, because once this concept is understood, the entire story becomes much clearer.
Public Investigative Series | Episode 37
Topic: How Can Pakistan’s Electricity System Be Fixed?
Title: Sahiwal Coal Power Plant and Port Qasim Coal Power Plant: A Comparative Review
🔺 When institutions avoid providing facts, the responsibility of reaching the truth falls upon the public. Written and Researched by Syed Shayan
To understand the policies of Pakistan’s power sector, a comparison between the Port Qasim Power Plant and the Sahiwal Coal Power Plant is enough.
One of these projects was built in Karachi, close to the port where imported coal is unloaded directly. The other was built almost 1,000 kilometres away in the agricultural region of Sahiwal, even though it also depends on the same imported coal, which has to be transported from Karachi by rail.
In principle, electricity generated at Port Qasim should have been clearly cheaper than electricity generated at Sahiwal. However, in NEPRA’s tariff structure, Port Qasim’s dollar-indexed port handling charges, jetty charges and complex capacity payment formulas weigh so heavily that they cancel out Sahiwal’s railway freight disadvantage. As a result, even though Port Qasim is located near the port, its logistical advantage is effectively neutralised, and no major difference remains between the cost of the two plants.
The practical reality is that, because of poor planning and expensive agreements, both plants have now become almost identical financial burdens on Pakistan’s power sector. On one side, Port Qasim carries the pressure of dollar indexation and foreign payments. On the other side, Sahiwal carries the burden of rising railway freight costs. In the end, the cost of both is passed on to the public in the form of expensive electricity.
It should be noted that the Sahiwal plant was completed in October 2017, while the Port Qasim plant was completed 6 months later in April 2018. For this reason, Port Qasim can be described as the second major CPEC project completed immediately after the Sahiwal Coal Power Plant, with both projects entirely dependent on imported coal.
Sahiwal and Port Qasim are both separate 1,320 MW power plants. Together, they represent a combined generation capacity of 2,640 MW. Both projects were developed under CPEC on the private power producer model, and both used modern supercritical technology.
These two projects, initiated during the government of Nawaz Sharif, were built under long-term agreements of 30 years each. Under these agreements, the Sahiwal Coal Power Plant contract will end in October 2047, while the Port Qasim Power Plant contract will be completed in April 2048. This means that for more than the next 2 decades, the people of Pakistan will continue to bear the consequences of these agreements through their electricity bills. In other words, until 2047 and 2048, the public will continue paying capacity payments, dollar indexation and financing costs attached to the assumed costs of these two plants.
These two 1,320 MW plants, Sahiwal and Port Qasim, were built under CPEC at a reported cost of nearly $2 billion each, a figure that continues to raise serious questions among international energy experts.
According to international figures, similar coal power plants in China itself have generally been built at a per MW cost of around $488,000 to $657,000. On this basis, the realistic cost of a 1,320 MW plant should have been approximately $640 million to $870 million, meaning less than $1 billion. Yet in Pakistan, Sahiwal was shown at a cost of approximately $1.8 billion, while Port Qasim was shown at approximately $1.91 billion. In global comparison, this is almost double the expected cost.
The Muhammad Ali Report, formally known as the Power Sector Inquiry Committee Report 2020, exposed an important part of this entire mechanism. According to the report, in imported coal projects such as Sahiwal and Port Qasim, room was created through project cost, borrowing cost and tariff assumptions that allowed IPPs to receive higher payments, with the burden ultimately transferred to electricity consumers.
The most important point was that, on paper, the construction period of these plants was assumed to be 48 months, although in reality these plants were completed in approximately 27 to 29 months. In principle, the benefit of early completion should have gone to Pakistan’s economy and electricity consumers. But here, the opposite happened. Since the construction period was shown as longer, interest during construction, financing costs and other expenses were also included in the project cost on the basis of 48 months.
The report also pointed out that the sponsors did not present an accurate picture regarding borrowing and interest payments. The result was that amounts which should not have been included in the actual cost became part of the project cost. The tariff was then built on that inflated cost. Debt repayment was determined on that basis. Investor profits were calculated. Dollar indexation was applied. And the burden of capacity payments continued to rise.
The real question is this: when these plants were being approved, on what basis did our rulers, bureaucrats and policy-makers accept such massive costs, long-term agreements and dollar indexation? The final determination of corruption is a matter for the courts. But on the face of it, this matter certainly appears to be, at the very least, a clear example of serious negligence, reckless decision-making and decisions made against the national interest.
The problem is that this wrong decision was not a one-day mistake. Its punishment will be paid by the people of Pakistan for 30 years, almost until 2048, through electricity bills, capacity payments and expensive tariffs. In any serious country, such a matter would be treated as a national crime. But in Pakistan, many of the people who made these decisions remain part of the system and continue to make further decisions with the same confidence.
Today, the ground reality is that the CPEC power plants built with China’s support have made Pakistan’s circular debt crisis even more severe through their expensive agreements and payment structures.
In 2022, the Government of Pakistan created the Pakistan Energy Revolving Account at the State Bank of Pakistan. The purpose was to allocate Rs 48 billion every year so that at least partial payments could be made to Chinese IPPs on time. But this account was never fully funded, nor could it establish a regular payment mechanism.
As a result, the dues of Chinese IPPs continued to rise. In June 2025, this amount was approximately Rs 430 billion. It later increased to approximately Rs 560 billion, close to nearly $2 billion.
Now the problem is that the government is preparing a Rs 1.275 trillion plan to reduce circular debt. Under this plan, the government wants IPPs to show some flexibility in their agreements, for example by reducing late payment surcharges, softening profit conditions, or easing the overall payment burden.
But Chinese IPPs are saying that they will not amend their Power Purchase Agreements, because these agreements are backed by Chinese bank financing and security arrangements. In simple terms, Pakistan is trapped.
Either Pakistan prepares a new circular debt plan without persuading China, which is difficult.
Or it seeks concessions from local IPPs while leaving Chinese IPPs untouched, which may create political and diplomatic problems. It also appears that the cracks already visible in the friendship once described as “higher than the Himalayas” may now be approaching a breaking point.
China has helped Pakistan in the past through loan roll-overs. But when it comes to the return on investment (ROI) of CPEC IPPs or the extension of loan repayment periods through debt rescheduling, Beijing’s position has always remained extremely firm. For China, this is not merely a matter of friendship. It is a matter tied to the business model of its banks and insurance companies, including Sinosure.
Behind much of China’s overseas investment stands Sinosure, the short name for China Export & Credit Insurance Corporation. It is China’s state-owned insurance and guarantee institution. When a Chinese company builds a power plant in Pakistan, or when Chinese banks finance such a project, Sinosure becomes their guarantor. If Pakistan fails to make payments on time, Sinosure first compensates the Chinese company or bank for its loss, and then seeks recovery of that amount from the Government of Pakistan through all available channels.
Because Sinosure is a Chinese state institution, the matter no longer remains limited to a private company. It becomes a sensitive financial and diplomatic issue between the Government of China and the Government of Pakistan.
In such a situation, if Pakistan increases pressure on Chinese IPPs, there is a risk that the diplomatic coldness felt in recent times may deepen further. And if concessions are not obtained, local industries will remain buried under the burden of expensive electricity. In that case, the dream of “Energy-led Industrialization”, the very dream that could pull this country out of its economic swamp, will never be fulfilled.
This entire electricity system can no longer be fixed merely through payment balancing or accounting adjustments. The crisis has now crossed a critical threshold. Time has shown that unless the agreement of each individual power plant is made public and its full record is brought before the people, this crisis will continue in its present form.
In your opinion, does Pakistan now have any third option left other than converting the circular debt of Chinese power plants into long-term bonds? Or is this entire system now moving toward a major “default”?
[To be continued in the next episode.]
