Taming the monstrous electricity rates.

• Author: Rahim, Shahid

Byline: DR. SHAHID RAHIM

Electricity rates in Pakistan were raised recently by a hefty Rs. 4.96 per unit by the government to meet an IMF condition for securing its latest bailout package. While consumers were struggling to swallow this bitter pill for the sake of saving our country from an impending financial default, the media is again abuzz with the news of another hike by Rs. 2.31 per unit in the name of fuel price adjustment. These frequent and heartless rate hikes make it evident that our government does not have any new or viable solution to deal with the power sector issues other than squeezing the helpless consumers who are already drowning under the burden of an endless streak of electricity rate hikes.

Reports from multiple sources indicate that electricity rates in Pakistan are already among the highest in the region. Some analysts blame the pervasive inefficiencies and poor management in the power sector to be the root cause of this issue. This writer tends to differ with such views. Efficiency and management within the power sector must improve, no denying, but these steps alone will not rid the power sector of its root ailment. A new vision coupled with a systemic overhaul of this sector is essential to save it from sinking and to transform it into a viable contributor to our economy and people.

Primary cause

The problem with higher electricity rates is that it stifles both human growth and economic development. These rates, if exceed the affordability limit of citizens (normally below 10% of their income), adversely affect their quality of life, compelling them to compromise on food, education, and health. They are also compelled to use traditional fuels which affect their health and safety. High electricity rates also hurt the competitiveness of agricultural consumers, commercial businesses, and industries, forcing them to seek alternatives, shift elsewhere, or in extreme cases, closedown.

It is, critical that we eliminate the primary causes of our "higher-than-normal electricity" rates and take measures to ensure the provision of affordable, secure, and sustainable power supplies to our people and economy in the future.

The primary cause of the higher electricity prices in Pakistan, in this writer's view, is our over-reliance on central-station power supply system which is largely based on imported technologies and fuels. This has led to supplies which are prohibitively expensive, inequitable, and unsustainable. However, no amount of rumination will reverse the decisions taken in the past. We must now focus on seeking a course that will mitigate the adverse effects of past decisions in the short run, eliminate these causes in the medium run, and shift to affordable and sustainable electricity supplies in the long run.

The whole power sector edifice is built upon a single premise-electricity demand will evolve within a tight band of forecasts. Any significant deviation from the forecast can render the system either with over-or under-capacity, each with its own cost. We hear some experts emphasize that we need more accurate forecasts. Yes, we do, but only if the world around us were stable. Energy markets around the world are in constant flux. The patterns of consumer demand, its...