Independent Power Producers (IPPs) in Pakistan: An Elite Capture

IPPs, energy, corruption, forensic audit, solar panel, neo liberal economy, capitalist, subsidy, tax, elite, elite capture,

Abstract

Elite capture significantly hampers equitable development by allowing powerful elites to manipulate resources and policies for their own benefits. This dynamic is particularly evident in Pakistan's power generation sector, where Independent Power Producers (IPPs), including both government-owned and privately owned entities dominate electricity production. The agreements with IPPs impose rigid financial obligations on the state, mandating payments for the total production capacity, regardless of actual consumption. This results in significant financial strain, particularly during periods of low demand, such as winter, where electricity needs are minimal. The high costs associated with these payments inhibit industrial competitiveness, stifling economic growth and increasing unemployment.  48% of the IPPs working in the country are privately owned. They belong to elite groups including big businessmen, politicians or establishment. This study aims to investigate that whether the enigma of IPPs is an example of elite capture in Pakistan. The study adopts qualitative research where both primary and secondary sources are used for data collection. Procedurally, data has been collected by conducting interviews with experts in the relevant field, which has been then codified and analyzed through the thematic data analysis technique. The study found that IPPs is an important example of elite capture in Pakistan because the government is reluctant to conduct a forensic audit against them as it is unable to absorb pressure of the IPP owners. They compel the government to make policy in their own interest instead of addressing the energy needs of the nation. In order to serve elite’s interest, the government compels the masses to stay connected to national grid instead of going towards the cheaper sources of energy.