Interview with Mr. Sajjad Ahmad, Chairman of the Board of Directors of Central Power Generation Company Limited (CPGCL), Pakistan
Profile:
Mr Sajjad Ahmad is a UK-Qualified Accountant FAIA (UK), Chartered Management Accountant, corporate governance professional and energy-sector specialist. He currently serves as Chairman of the Board of Directors of Central Power Generation Company Limited (CPGCL), Pakistan, and as an Independent Director on the Boards of Jamshoro Power Generation Company Limited (GENCO-I) and Lakhra Power Generation Company Limited (GENCO-IV). He has extensive experience in corporate governance, financial management, infrastructure financing, regulatory compliance and strategic leadership. His professional interests include electricity market reforms, energy economics, public sector governance and sustainable infrastructure development. He is a visiting faculty at Cecos College London. He is Chairman Quality Assurance Board of ICMAP (Chartered Management Accountant).
Pakistan & Gulf Economist had an exclusive conversation with Mr. Sajjad Ahmad. The views expressed are solely those of Mr Sajjad Ahmad and do not necessarily reflect the views of the organisations with which he is associated.
Excerpts of the conversation are as follows:
Pakistan’s Power Crisis Is Not What It Seems:
The country does not simply need more electricity. It needs a power system that is financially disciplined, technologically modern and capable of adapting to a changing energy market.
To the ordinary electricity consumer in Pakistan, the power sector appears to be a permanent national contradiction. The country has added generation capacity, yet electricity remains expensive. Power plants may be available, yet some communities still experience interruptions. Solar panels are appearing on rooftops at remarkable speed, yet the national grid remains dependent on conventional generation. Governments repeatedly announce reforms, while circular debt continues to occupy a central place in the country’s economic discussions. The usual conclusion is that the system is simply badly managed. That conclusion is not entirely wrong—but it is incomplete.
Pakistan’s power crisis is not a single problem with a single solution. It is the cumulative result of decisions concerning generation contracts, fuel imports, exchange rates, subsidies, transmission investment, electricity theft, bill recovery, regulation and political reluctance to charge the full cost of supply. It is also increasingly shaped by a rapid and largely consumer-led transition towards solar power.
This distinction matters. Countries rarely repair complex infrastructure systems by treating symptoms as causes. Pakistan does not merely need more megawatts. It needs to redesign the commercial, regulatory and technological foundations through which electricity is generated, transported, purchased and paid for. The challenge carries international significance. Many emerging economies face the same difficult triangle: electricity must remain affordable for households, reliable for businesses and sufficiently profitable to attract investment. Pakistan’s experience demonstrates what can happen when these objectives are pursued separately rather than as parts of one integrated strategy.
Electricity is an economic system, not merely a utility:
Electricity policy is often discussed as though it were a technical matter confined to engineers and regulators. In reality, it sits at the centre of national economic policy.
Reliable power supports industrial production, exports, digital services, healthcare, education and investment. Unreliable or excessively costly electricity raises the price of almost everything else. It weakens business competitiveness, discourages investment and reduces the capacity of domestic industries to compete internationally.
Pakistan’s own energy strategy recognises energy security, affordability, sustainability, integrated planning, decarbonisation and digitalisation as connected priorities. This reflects an important reality: the power sector cannot be sustainably repaired by adjusting tariffs in isolation, constructing another power plant, or announcing another subsidy.
Electricity moves through a chain. Generators produce it. Transmission companies move it over the high-voltage network. Distribution companies deliver and bill for it. Regulators determine allowable costs and consumer tariffs. Market institutions settle payments among participants. A financial or operational failure at one point travels through the entire system.
This is why Pakistan’s power-sector weaknesses repeatedly become fiscal, industrial and social problems.
The first misconception: Pakistan only needs more generation
For years, the country’s electricity debate focused on installed generation capacity. The assumption was intuitive: power shortages could be solved by constructing more power plants.
That approach addressed one constraint but exposed another. Electricity that cannot be transmitted, distributed or commercially recovered does not create a healthy power system.
Pakistan now has a diversified generation structure involving hydropower, nuclear, gas, imported LNG, coal, wind and solar. Each source performs a different function. Hydropower can provide comparatively inexpensive renewable electricity, but output varies with water availability. Nuclear plants provide dependable low-carbon baseload power. Gas-fired plants offer flexibility but may expose the country to imported-fuel prices. Solar and wind reduce fuel dependence but are variable and require balancing resources.
The existence of generation capacity therefore does not guarantee that electricity will arrive at the correct place, at the correct time and at an affordable cost.
Transmission congestion, inadequate evacuation capacity, aging equipment and overloaded distribution infrastructure can restrict the delivery of available power. Renewable integration makes grid investment even more urgent because a system designed around large, predictable generators must now accommodate electricity arriving from thousands of smaller and more variable sources.
Pakistan’s next phase of power-sector development must therefore prioritise the network at least as seriously as generation. Building plants without strengthening the grid is comparable to expanding a factory while neglecting the roads needed to transport its products.
The second misconception: the tariff is simply the cost of fuel
Consumers understandably judge the sector through their monthly bills. Yet the final electricity tariff does not merely reflect the fuel burned to produce a unit of power.
It can include fuel, variable operating costs, transmission and distribution expenses, taxes, financial charges, system losses, regulatory adjustments and the fixed costs of maintaining generation capacity.
That distinction becomes particularly important in an economy exposed to currency depreciation and imported fuel. When the rupee weakens, the domestic cost of dollar-linked fuel, foreign debt and contractual obligations increases even if the operational efficiency of a power station remains unchanged.
Tariffs also reflect the history of previous policy choices. When governments delay necessary adjustments or provide subsidies without timely financing, the cost does not disappear. It moves elsewhere in the system, often taking the form of unpaid obligations, borrowing costs, deferred maintenance or circular debt.
The International Monetary Fund has repeatedly connected Pakistan’s energy-sector viability with cost recovery, targeted rather than broad subsidies, stronger collections and reforms to lower structural costs. The difficult policy lesson is that artificially low tariffs can eventually produce more expensive electricity by weakening the institutions responsible for supplying it.
Affordability remains essential, particularly for low-income households. But social protection and commercial pricing should not be confused. Vulnerable consumers should be supported transparently through targeted assistance. Permanently underpricing electricity for broad categories of consumers weakens both the budget and the electricity system.
Capacity payments are not free money—but poor planning makes them dangerous
No component of the tariff attracts more criticism than capacity payments.
The popular description is that consumers are being charged for electricity that was never produced. This is politically powerful, but economically incomplete.
A power plant incurs substantial fixed costs whether it generates electricity every hour or remains available for periods of high demand. Investors and lenders require confidence that debt servicing, fixed operations, insurance and agreed returns can be recovered. Capacity payments compensate a plant for being available, while energy payments usually reflect the cost of electricity actually produced.
Capacity mechanisms are not unique to Pakistan. Electricity systems in different parts of the world use various forms of availability payments or capacity markets to ensure sufficient dependable generation when it is needed.
The real problem arises when demand forecasts are too optimistic, contracts allocate excessive risk to the buyer, the currency depreciates sharply, or new capacity is added without adequate retirement of inefficient plants. In those circumstances, consumers may finance a system substantially larger or more expensive than current demand requires.
The choice is therefore not between having capacity payments and having none. The more useful questions are whether Pakistan procured the right capacity, under appropriate terms, with realistic demand forecasts and a suitable allocation of currency, fuel and operational risks.
Contract renegotiation may provide relief, and recent reform programmes have included settlements with independent power producers. But renegotiation cannot substitute for better future procurement. Without stronger planning, transparent competitive contracting and disciplined demand forecasting, today’s relief could become tomorrow’s liability.
Circular debt is an accounting outcome of institutional failure
Circular debt is often described as though it were an independent pool of money that appeared inside the power sector. It is better understood as the financial record of costs incurred but not fully recovered or paid.
When consumers do not pay their bills, distribution losses exceed regulated allowances, subsidies are delayed, tariffs fail to recover costs, or government entities accumulate arrears, distribution companies cannot fully pay the central power purchaser. The purchaser then cannot fully pay generators, and generators may struggle to pay fuel suppliers and lenders.
The debt is therefore “circular” because one institution’s unpaid receivable becomes another institution’s unpaid liability.
Pakistan made progress in reducing the flow of circular debt through tariff adjustments, stronger collection performance, lower financing costs and other reforms. The IMF reported that the stock stood at approximately Rs2.53 trillion by the end of February 2025, while subsequent reform arrangements included restructuring and clearing portions of the stock. A World Bank assessment published through the IMF estimated power-sector circular debt at Rs1.764 trillion in early 2026, while also warning that the associated reforms create short-term affordability pressures.
These figures show that progress is possible. They also show why one-off financial restructuring is not enough.
A debt stock can be refinanced, converted or partially settled. But unless new losses are prevented, the system will begin accumulating debt again. Sustainable reform must therefore change the operational behaviour that produces the deficit: poor recovery, excess losses, theft, delayed payments, inefficient procurement and politically driven pricing.
Circular debt is not the disease. It is the balance-sheet evidence of the disease.
Solar power is transforming the market—but it is not abolishing the grid
Pakistan’s rapid adoption of solar power is one of the most significant changes in its energy landscape.
For households and businesses facing high electricity tariffs, unreliable supply and falling solar-technology costs, installing rooftop generation is a rational economic decision. It can reduce exposure to the grid and provide greater control over energy expenditure.
At the national level, solar can reduce fuel imports, diversify supply and support decarbonisation. The International Energy Agency notes that hydropower remains Pakistan’s principal renewable source while wind and solar are growing. Globally, the IEA expects renewables and nuclear power to continue setting generation records through 2030, with renewable growth increasingly meeting additional electricity demand.
Yet distributed solar also creates a difficult transition for traditional utilities.
Consumers with the financial ability to install panels purchase less grid electricity. However, the transmission and distribution networks must still be maintained, and conventional plants may still be needed after sunset or during periods of low renewable output. If the remaining fixed costs are recovered from a shrinking volume of grid sales, tariffs may rise further—encouraging still more consumers to leave.
This is sometimes described as a utility “death spiral”. It is not inevitable, but it requires tariff reform.
Charges must increasingly distinguish among the cost of energy, the cost of network access and the cost of maintaining dependable backup capacity. At the same time, regulators must avoid designing charges that unfairly punish renewable adoption or preserve inefficient utility structures.
Solar is not the enemy of the grid. It is exposing the need for a different grid—one that can manage two-way electricity flows, flexible demand, storage, modern metering and more active consumer participation.
Renewables are essential, but solar and wind remain variable. Storage, stronger interconnections, demand management, hydropower, nuclear energy and flexible generation will all have roles in maintaining reliability. The energy transition is not a contest in which one technology must eliminate every other technology. It is a system-design challenge.
The reform agenda must move from prices to performance
Pakistan’s recent reform programme includes stronger enforcement, improved distribution-company performance, transmission restructuring, private-sector participation, power-market development and progress towards competitive electricity trading. These are necessary steps, but implementation will determine whether they produce lasting results.
Five priorities stand out.
First, distribution companies must be held accountable through transparent, comparable performance measures. Losses, recoveries, outages, complaint resolution and service quality should be publicly monitored. Management autonomy should be accompanied by genuine responsibility for outcomes.
Second, subsidies must be targeted at vulnerable consumers rather than embedded broadly within tariffs. Social policy should protect people, not conceal the commercial cost of electricity.
Third, investment must shift towards transmission, distribution automation, smart metering and digital system management. Artificial intelligence and analytics can improve demand forecasting, theft detection, maintenance planning and grid balancing, but technology must be accompanied by institutional capability.
Fourth, the move towards a competitive electricity market must be gradual but credible. Pakistan’s planned transition from the traditional single-buyer structure towards bilateral trading could give eligible consumers greater choice and encourage generators and suppliers to compete. However, competition will not succeed without transparent network access, reliable settlement arrangements, creditworthy participants and a regulator capable of preventing market abuse.
Finally, future power procurement must be disciplined by realistic demand forecasting. Governments should resist the temptation to sign long-term contracts merely to demonstrate that capacity has been added. The quality, flexibility and total lifetime cost of electricity matter more than headline megawatts.
A wider lesson for developing economies
Pakistan is not alone. Many developing countries have expanded generation while struggling with weak utilities, subsidised pricing, inadequate networks, fuel-import exposure and political resistance to reform.
The broader lesson is that electricity transitions are not achieved by technology alone.
A country may install renewable capacity and still retain an insolvent power system. It may raise tariffs and still fail to improve service. It may privatise assets without creating competition. It may eliminate shortages temporarily while signing contracts that undermine future affordability.
Successful reform requires the alignment of engineering, finance, regulation and social policy.
Consumers must pay a fair and understandable price. Vulnerable households must receive targeted support. Investors must earn predictable returns without being insulated from every commercial risk. Utilities must be rewarded for efficiency rather than compensated for failure. Regulators must protect consumers while allowing the sector to recover legitimate costs.
Most importantly, governments must communicate honestly. Electricity cannot simultaneously be universally cheap, continuously reliable, independent of imported inputs, environmentally sustainable and attractive to private capital without difficult trade-offs.
Beyond blame
Pakistan’s power sector has serious weaknesses. Electricity theft, excess losses, poor recovery, weak governance, contractual rigidity and political interference should not be excused by describing the sector as “complex”.
But complexity should prevent false simplicity.
Capacity payments are not automatically corruption. Renewable energy is not automatically dependable energy. Higher installed capacity does not automatically create reliable supply. Lower tariffs do not automatically create affordability if they produce debt, inflation or deteriorating service elsewhere.
The country now has an opportunity to move beyond the old cycle of shortages, emergency generation, subsidies, arrears and repeated bailouts.
The next power-sector settlement must be based on three principles: transparent costs, accountable institutions and technological adaptability.
Pakistan does not need to choose between the grid and solar power, between consumers and investors, or between affordability and financial discipline. It needs regulatory and commercial arrangements that balance these interests over time.
The future of the sector will not be secured by adding generation alone. It will be secured when every unit produced can be transported efficiently, billed accurately, paid for fairly and supplied through a system capable of adapting to new technologies and changing patterns of demand.
Only then will Pakistan’s electricity debate move from managing crisis to building competitiveness.