London, Jan 20 Pakistan’s electricity crisis refuses to yield to repeated rounds of reform. The latest assessment by the power sector regulator identifies rising costs, stagnant demand, under-utilised capacity, persistent inefficiencies in transmission and distribution and an electricity system that continues to weigh on economic growth rather than support it, media reports said.
Pakistan cannot industrialise, grow its manufacturing base, or expand exports without affordable and reliable electricity, according to an article in The News International.
It said that energy is not merely a utility; it is a core input into competitiveness. High power tariffs function as an implicit tax on industry, pricing Pakistani exporters out of regional and global markets.
No industrial policy, export incentive or exchange-rate adjustment can compensate for structurally expensive electricity, the article points out.
Yet the dominant policy response continues to gravitate towards ownership change at the distribution end. Privatisation of distribution companies is repeatedly presented as the missing reform that will unlock efficiency and discipline. In reality, it risks becoming another distraction from the deeper structural problems embedded in the system, the article laments.
In a system where tariff decisions are often subordinated to political considerations and payment discipline is weak, it is difficult to identify private investors with the balance-sheet strength and risk appetite to take on such assets at scale. Even if ownership were transferred, the underlying economics would remain unchanged, it observes.
In most countries, electricity grids remain publicly owned or tightly regulated natural monopolies. Efficiency gains are typically achieved through governance, enforcement and planning discipline rather than outright privatisation.
Efficiency has flowed from predictability and discipline, not from changing who owns the wires, the article points out.
It explains that at the heart of this problem lies the structure of generation contracts. Capacity payments have grown into the single largest burden on the system. Pakistan now pays power plants not for electricity consumed, but for availability, regardless of whether the power is needed. Many plants operate well below capacity, yet their fixed dollar-denominated costs are fully recovered from consumers. These contracts were signed on the assumption of sustained demand growth and high utilisation rates that never materialised.
Projects financed under large bilateral and multilateral arrangements intensified this rigidity. While they added capacity quickly, they also locked the system into long-term take-or-pay obligations with limited flexibility. As the regulator has repeatedly pointed out, the result is a generation cost structure that dominates the tariff and leaves little room for relief elsewhere in the value chain, the article added.
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