According to the World Bank report on Pakistani power sector, Pakistan suffered the losses of $18 billion due to the deficiencies in the power sector. The Pakistan office of World Bank released the report yesterday titled “In the Dark: How much do power sector distortions cost South Asia”. The report also urges the policymakers to avoid increasing electricity prices as a solution to power sector’s financial problems.
The World Bank stated that “Reforms must go beyond liberalising energy prices to address several aspects of the power sector distortions”.The report stresses the need to prioritising gas allocation for efficient power generation and adopting tariff mechanisms that encourage performance as solutions to the problem.
Pakistan suffered a lot because of electricity shortage and load shedding. The report noted that the cost of inefficiencies in the power sector to Pakistan’s economy was $18 billion or 6.5% of gross domestic product (GDP) three years ago. Even though, the production and supply has increased in last few years that improve the general situation but market distortions are still there.
The author of this report and senior economist of World bank Fan Zhang estimated that the power sector reforms could save Pakistan’s economy by $8.4 billion in business losses and could increase total household incomes by at least $4.5 billion a year. In manufacturing and services combined, total losses in annual output attributable to power shortages amounted to $8.4 billion in Pakistan in fiscal year 2015. In Pakistan, the impact of lack of reliable access to electricity on households and firms is the largest source costing roughly $12.9 billion a year, it added.
Almost a fifth of electricity generated is lost through poor infrastructure, faulty metering and theft. Load-shedding is caused by high cost, losses and subsidies, which compromise investments and the ability to procure fuel.
The report argues that reforms that focus solely on liberalising energy prices would lead to an excessively high cost of electricity because of inefficiencies in the system, negatively impacting the poor and vulnerable.
Interestingly, the IMF, World Bank and Asian Development Bank (ADB) have been pursuing the policy of increasing tariffs to end energy sector’s woes.
On the long-term basis, the increase in tariffs alone would not address the problems but in the short-term it can solve the fiscal problems, said Richard Laden, the lead energy specialist of the World Bank. He said it was important to focus on revenue side but it was equally important to look at the generation side to address the sector’s problems.
The report stated that for the benefit of consumers, energy sector reforms should focus on rationalising consumer prices for electricity and gas to reflect supply costs and social assistance to help vulnerable populations cope with increased energy prices. Increased access to reliable power must be made a priority, it added.
According to this report, 50 million people in Pakistan still do not have access to grid electricity and frequent load-shedding damages businesses and health and living standards of consumers. The report also contests the government’s claim that in Pakistan 99% of the population has access to the grid electricity. The census data and the number of connections reported by utilities suggest that the access to grid electricity was only about 74% in 2016.
World Bank Country Director for Pakistan Illango Patchamuthu said,Pakistan can boost economic growth and job creation by overcoming inefficiencies in its power sector.” Reforms that address these distortions can make better use of existing facilities. These need to focus on eliminating waste, promoting the shift towards cleaner energy and attracting private investments, he added.
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24 August, 2019