Power outages: middle class suffers the most

In case you already didn’t know, Pakistan’s middle class is really stuck in the middle. Latest research by economists Hafiz Pasha and Wasim Saleem suggests that the burden of power outage costs as a percentage of total consumption expenditure by a household is the highest on the ‘middle class’ living in Pakistani cities.
The study titled The Impact and Cost of Power Loadshedding to Domestic Consumers adds that the middle class also suffers the most in terms of power outage cost per kilowatt hour. According to the paper released at PIDE’s annual conference earlier this month, the outage cost per kwh is the highest for the `middle class` at Rs27-Rs 29. In terms of outage cost per kwh Sindh suffers the most with Rs40 per kwh, while the lowest cost is in Punjab at Rs18 per kwh.
The authors estimated that the total electricity consumption cost to household at different levels of total consumption expenditure is around 17 percent, where the cost is the lowest for the upper most income group.
Keeping in mind that the recent increase in tariffs will put a large burden, especially on the middle class, the paper’s findings mean that the high share of expenditure on electricity is cutting into consumption of food, clothing and basic services (like education and health), especially by the low income groups. The “indirect impact of the high-level of load shedding in the country is the reduction in nutrition levels, particularly of children,” the paper noted.
In an earlier study, the authors had calculated the outage costs to be equivalent to 7 percent of GDP in 2011-12. It would be interesting to see what would be the subsidy-adjusted cost of power outages to different consumers, considering that different consumer categories get different subsidies.
While we wait for the policy research community to find that out, here is a bit of worrisome factor to dwell on. Pasha’s study, which also takes into account household perception, concludes that the households have no confidence on the services provided by the power sector. The study noted that 43 percent of the respondents rated the quality of power services as ‘very low’ and 35 percent as ‘low’.
This means that distribution companies, in particular, have to work very hard not only to rehabilitate themselves but also their image. The latter so because research by economists at the IBA has shown that approximately 60 percent of the energy inflation is explained by adaptive expectations, which in turn is partly affected by the quality of institutional, regulatory and organisational infrastructure. Need one say more!