What Did Pakistan and Its People Actually Gai...

An Interview with Shahid Hasan Khan, the Architect of Pakistan’s IPP Framework and the Initial IPP Agreements in Pakistan (Part Three)

Public Investigation Series | Episode 41

Topic: How Can Pakistan’s Power System Be Fixed?

Title: What Did Pakistan and Its People Actually Gain from IPPs?

🔺When institutions fail to present the facts, the responsibility of seeking the truth falls upon the public.

🔴🟡🟢 Interview by: Syed Shayan

At the end of the previous episode, I asked Shahid Hasan Khan:

🔘Question:

If the public ultimately had to bear the burden of expensive electricity, capacity payments, surcharges and additional taxes, while still suffering from load shedding, then what exactly was the benefit of the entire IPP model for Pakistan and its people?

🔘Shahid Hasan Khan replied:

It is not correct to say that IPPs brought no benefit to Pakistan or its people. There was a time when the country was facing an acute electricity crisis. Daily load shedding lasted for several hours. Industries were suffering, businesses were shutting down and the government simply did not have the financial resources to build new power plants.

Through the IPP program, private investment entered the power sector and approximately 3,000 megawatts of additional electricity was added to the national grid. This helped Pakistan overcome its immediate electricity shortage. Had this capacity not been added at that critical time, industrial production, employment and the national economy could have suffered even greater damage.

He continued:

“You cannot judge the decisions of 1994 solely through today’s circumstances. The real question at that time was where the electricity would come from and how quickly it could be generated. The government had no money, WAPDA was not in a position to construct new power plants and the country could not afford to wait several more years. The IPP model filled that gap.”

According to Shahid Hasan Khan, the problem did not lie in the original and limited use of the IPP model. Its purpose was simply to address an immediate electricity shortage. The real problem emerged later when successive governments approved more than one hundred IPPs without accurately assessing future demand or expanding the transmission and distribution system accordingly.

As a result, generation capacity kept increasing while the power system was no longer capable of handling it efficiently. A model designed to solve a limited emergency eventually became a structural problem because of poor planning by later governments.

He emphasized:

“We never proposed that every future government should continue building power plants under the same model indefinitely. Our recommendation was to procure a limited amount of electricity through a limited number of IPPs to overcome a specific crisis. Future decisions should have been based on actual electricity demand, transmission capacity, fuel costs, the exchange rate and consumers’ ability to pay. Unfortunately, that did not happen.”

He further stated that if later governments had expanded generation in line with demand, upgraded the transmission and distribution network alongside new generation capacity, reduced line losses and electricity theft, and gradually shifted toward hydropower and other indigenous energy resources, Pakistan’s energy sector would look very different today.

Pakistan has installed more than 45,000 megawatts of generation capacity. However, transmission lines, grid stations and the distribution network were not upgraded proportionately. As a result, even when power plants are available, their full output cannot always be delivered to consumers.

He illustrated this with an example:

“It is like establishing large dairy farms capable of producing millions of litres of milk but failing to build enough refrigerated transport, storage facilities and distribution systems to deliver that milk to consumers. Increasing production alone serves little purpose if the distribution system cannot handle it. Electricity works the same way. Producing electricity is only one part of the system. It must also be transmitted and distributed efficiently through a strong transmission and distribution network.”

He added:

“Load shedding is not always caused by insufficient generation capacity. Sometimes fuel is unavailable, some power plants are shut down due to technical faults, transmission lines cannot carry the required electricity, distribution companies fail to recover payments, and circular debt disrupts the entire payment chain. Under such circumstances, power plants may exist, yet electricity still cannot reach consumers.”

Shahid Hasan Khan argued that today’s heavy electricity bills, taxes and other charges cannot be attributed solely to the 1994 Power Policy.

According to him, the current situation is the cumulative outcome of decades of poor planning, excessive expansion of IPPs, unbalanced contracts, severe depreciation of the Pakistani rupee, continued dependence on imported fuels, electricity theft, transmission losses, weak recoveries and successive political decisions.

He concluded:

“The benefit of the IPP model was that it enabled Pakistan to obtain electricity quickly at a time when the state itself lacked the financial capacity to build new power plants. The damage began when an emergency and limited solution was transformed into a permanent model without carrying out the institutional reforms that should have accompanied it.”(According to Shahid Hasan Khan, the IPP model initially played a crucial role in helping Pakistan overcome a severe electricity crisis. However, the subsequent expansion of power plants far beyond actual requirements, combined with the failure to implement structural reforms in the power sector, eventually transformed the system into one characterized by expensive electricity and mounting capacity payments.)

I then asked Shahid Hasan Khan:

🔘Question:You repeatedly state that your policy was designed to procure only about 3,000 megawatts of additional electricity through a limited number of IPPs, and that later governments expanded the model far beyond its original purpose. However, did the 1994 Power Policy contain any explicit cap, safeguard or automatic mechanism to prevent future governments from approving excessive numbers of IPPs? If no such protection existed, does that not place at least some responsibility on those who designed the policy?

🔘Shahid Hasan Khan replied:

“Your question is entirely legitimate. But you should also remember who I was. I was neither a politician nor a permanent civil servant. I was a technocrat assigned to address a specific national crisis. I chaired the Prime Minister’s Task Force on Energy. Under my leadership, the Task Force prepared its recommendations, which became the basis of the 1994 Power Policy. Before further work could continue, Benazir Bhutto’s government was dismissed. Once the government was gone, my responsibility ended and I left.”

He continued:

“You may also be overlooking one important point. I was not working alone. The Prime Minister’s Task Force on Energy included senior officials and experts from various ministries, WAPDA and the oil, gas and energy sectors. Governments come and go. Politicians and technocrats change. But state institutions and the civil service remain. It is the government’s responsibility to formulate policy, but it is the responsibility of state institutions and the bureaucracy to implement it, continuously review it, adapt it to changing circumstances and preserve its original intent. If negligence, poor judgment or misconduct occurred later, those responsible should answer for it. If you identify any fundamental flaw in our policy, you are welcome to point it out. But in my view, given the circumstances and resources available at the time, it was an ideal policy.”

Shahid Hasan Khan further explained:

“It should also be remembered that the Prime Minister’s Task Force on Energy was not simply a Task Force on Electricity. Our mandate extended far beyond electricity generation. We were working on the country’s entire energy sector, including electricity, oil, natural gas, hydropower, coal, energy planning, supply and demand projections, import dependence, indigenous resources and Pakistan’s long term energy strategy. Our objective was not merely to build a few power plants but to lay the foundation for a comprehensive national energy policy.”

He added:

“If later governments had continued to follow that vision, strengthened the transmission system, prioritized indigenous energy resources, especially hydropower, gradually reduced dependence on imported oil and approved new projects only where there was genuine demand, Pakistan’s situation today would have been completely different.”

To explain his point, he offered an analogy:

“Quaid-e-Azam Muhammad Ali Jinnah created Pakistan and provided a clear vision for the country. If Pakistan faces problems today, does that mean his vision was flawed? Certainly not. Responsibility lies with those who governed the country afterward. Similarly, my responsibility was to formulate a policy and define a direction. Its implementation, periodic review, necessary revisions and adaptation to changing national circumstances were the responsibility of the governments and state institutions that followed.”

He concluded:

“I remain convinced that if the original spirit of our policy had been preserved, Pakistan would not only have overcome its electricity crisis long ago but could have become a successful model in the energy sector.”

(To be continued.)