Senate documents have revealed the scale of pricing disparity within Pakistan’s electricity generation sector, showing that privately-owned independent power producers (IPPs), particularly those running on imported coal, charge up to twelve times more per unit than state-run hydroelectric dams operated by WAPDA.
According to figures presented in the Senate, WAPDA-run hydel stations generate power at some of the lowest rates in the country. Tarbela, the cheapest, produces electricity at just Rs. 2.70 per unit, while Mangla comes in at Rs. 3.75 per unit. By contrast, imported coal-based IPP plants sit at the opposite end of the spectrum, with Sahiwal Coal charging Rs. 34.17 per unit and Port Qasim Coal at Rs. 32.16 per unit — more than twelve times the cost of Tarbela’s hydel output.
Where the Cost Gap Comes From
The IPPs vs dams electricity cost gap becomes even starker when comparing total government payments. Despite generating far fewer units, WAPDA received Rs. 186 billion for 34.5 billion units supplied to the national grid. IPPs, on the other hand, were paid a staggering Rs. 1.04 trillion for 49.8 billion units — nearly six times the payment for only about 44% more electricity generated. On top of this, IPP capacity charges for the current fiscal year alone have exceeded Rs. 1.3 trillion, a fixed cost paid regardless of how much electricity these plants actually produce.
Other generation sources fall somewhere in between: Chashma’s nuclear plant produces power at Rs. 6.76 per unit, while Thar’s domestic coal comes in at Rs. 19.03 per unit — still dramatically cheaper than imported coal despite both being coal-based technologies. The difference underscores how fuel sourcing, not just plant type, drives much of the cost disparity in Pakistan’s energy mix.
Why This Matters for Electricity Consumers
These figures add fresh scrutiny to Pakistan’s long-standing capacity payment arrangements with IPPs, which have repeatedly been cited as a major driver of high electricity tariffs nationwide. Even when demand is low and IPP plants sit idle, the government remains obligated to pay fixed capacity charges under existing power purchase agreements, a structure that critics argue insulates producers from utilization risk while burdening consumers and the national exchequer.
With hydel and nuclear generation proving dramatically cheaper on a per-unit basis, energy policy experts have long argued for greater investment in domestic renewable and hydro capacity to reduce reliance on costlier imported-fuel plants. However, restructuring existing IPP contracts remains a politically and legally complex undertaking, given the long-term agreements signed with these producers.
The disclosure comes as oil marketing companies separately press regulators over their own margins, with OCAC demanding OGRA release pending increases and settle billions in outstanding claims, reflecting the broader pricing tensions running through Pakistan’s energy sector.