By 2025, Pakistan’s already dysfunctional power sector was thrown into deeper chaos—sacrificed wholesale to fulfill IMF-imposed benchmarks. Years of policy effort and billions of dollars in gas infrastructure were discarded overnight. At the IMF’s behest, the government slapped a so-called “grid transition levy” on industrial gas consumption for captive power, not to fix the crisis, but simply to force industries onto a broken national grid.
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The move wasn’t based on logic or economics—it was about ticking boxes. An emergency ordinance was bulldozed through to meet the IMF’s January 31st deadline. But the formula used to justify the levy hilariously backfired: it showed a negative levy—because gas-fired captive power was actually more expensive than grid power at RLNG rates. So, what did the government do? They made up a fake number: Rs 791/MMBtu, conjured out of thin air, just to pretend compliance. Meanwhile, favourite sectors like fertilizer quietly got gas via private monopolies under Third Party Access—without paying a single rupee of this “levy.”
The fallout has been staggering. Gas use for captive power on the Sui system collapsed by up to 90% year-on-year. The power sector, in return, refused to take its RLNG allocations. The result? A massive surplus of 400 MMcf/d RLNG, forcing $12/MMBtu LNG cargoes to be dumped on domestic consumers for just $4. The E&P sector alone is staring at a $378 million loss due to curtailed local gas production.
Industries that invested billions in captive power plants have been thrown under the bus. Their entire ecosystems—painstakingly built around stable power—are now useless scrap. The national grid they’re being forced onto? Comically unprepared. It can’t handle the load, swings like a pendulum with constant fluctuations, and takes three years just to energize new connections. Meanwhile, the grid tariff stands at 12 cents/kWh—among the highest in the world.
But the policy carnage didn’t stop there. As part of the IMF-linked $1.4 billion “Resilience and Sustainability Fund,” furnace oil was next on the chopping block. Previously a critical fuel for industrial boilers and generators, furnace oil is now taxed like petrol, slapped with a Rs 82,000/ton petroleum levy on a base price of Rs 132,000/ton. The insanity? Exports barely fetch Rs 100,000/ton—yet any domestic buyer is expected to cough up Rs 234,000/ton, killing off local demand entirely.
What was once a domestically produced, job-supporting, value-adding resource is now being offloaded to foreign buyers at below domestic market rates—another case where everyone in Pakistan loses. Even the Petroleum Minister opposed the move, only to be silenced by a Finance Ministry clearly dancing to the IMF’s tune.
As if that weren’t enough, a new carbon levy is being rolled out on fuels—starting at Rs 2.5/litre in FY26—supposedly to push EV adoption and hit 30% electric vehicle sales by 2030. Never mind that the average EV in Pakistan costs $35,000 while GDP per capita is just $1,400, and there’s no supporting infrastructure. With no clarity on where the carbon levy funds will go, it’s just another excuse to bleed the public dry, while hills are being razed for golf courses and climate systems spiral out of control.
No one’s saying all foreign loans are bad. But when policy, institutions, and regulation are dictated by foreign lenders, the people are cut out of the equation. We’re left with regulatory bodies built to appease donors, not serve the public. Legal regimes that no judge understands. Contracts that can’t be scrutinized without triggering international investor lawsuits.
The truth? Pakistan’s energy bureaucracy was never truly Pakistani. It’s the Frankenstein creation of foreign donors—conceived by DFIs, abandoned midstream, only to be reinvented with the next loan. There’s no local buy-in. No institutional memory. No accountability. Just an endless carousel of half-baked pilot projects masquerading as reform.
Despite spending billions on “institution-building,” the power sector is still bleeding—crippled by theft, inefficiency, and circular debt. It’s time we asked:
Are our institutions failing because they’re Pakistani—or because they never were?
