The Power Minister during the Eid break felicitated the nation for a Rs3/unit respite in electricity tariff – that will last a quarter, at best. The respite is largely because of the previous quarterly adjustment being replaced with the new one and a slightly lower monthly adjustment (see Power Tariff: A quarter’s respite, published on April 1, 2024). Despite the temporary respite, let it be remembered that the average residential power tariff will still be 60 percent higher in April 2024, from a year earlier. Hardly anything to rejoice here.
Worse still is the fact that Pakistan that has long been considered in an “energy poverty zone” is plunging further into that. Pakistan has one of the lowest per capita electricity consumption in the world and the lowest outside of Sub-Saharan Africa. The company Pakistan finds itself in on the metric is the likes of Angola, Congo, Yemen, Sudan, Mozambique, and others. Unfortunately, this is quite a familiar territory for Pakistan – as it routinely gets bracketed with these countries in many other rankings from human development to healthcare access and from freedom of expression to rule of law.
It is quite astonishing that the average consumption per electricity connection in Pakistan sits at a 20-year low, at the least. Yes, Pakistan has had its fair share of problems from terrorism to natural calamities, but the stagnation is unprecedented. All this while, urbanization is believed to be on the rise and Pakistan has one of the highest electrification rates in the region. That the use case for electricity has not gone up in two decades is a telltale sign of how badly Pakistan has lagged behind in prosperity.
What may have caused this? Look no further than the never-ending tariff “rationalization” exercise. And here is where the good news is. While the consumption per capita is close to that of African nations, Pakistan now stands shoulder to shoulder with the likes of the USA, United Arab Emirates, and Singapore on at least one variable of the equation. Pakistan’s effective electricity tariff for use beyond 300 units is now comparable to the likes of the USA, already higher than the UAE, and inching closer to Singapore. Quite a list this. Just don’t mention PPP here.
Talking of which, the next base tariff adjustment of which the PPP (power purchase price, not the purchasing power parity) is the most critical component, promises more agony. This is where utmost respect to ground reality is required for the upcoming base tariff. The one currently in place is devoid of any connection with ground reality, affirmed again and again by mounting monthly and quarterly adjustments, and asserted by none other than the regulator itself.
The only way out of the royal mess is finding ways to increase consumption. With the current and proposed tariff scheme, increased consumption is the least likely of outcomes. Taxes and surcharges account for no less than 20 percent of the electricity bill – and that cannot continue. But such is the sorry state of affairs on the revenue front that energy and POL taxes are essentially the lifeline for the FBR.
The power generation will continue deviating from reference because apparently the purchase plan does not take into account the longstanding constraints of the transmission system. The evacuation from south to north remains a problem, and the constraint sensure that more expensive power plants are operated to avoid nationwide blackouts. A complete disregard for laws also means distribution companies continue to shed load when there is demand available. That is largely because they would rather mask the inefficiencies in controlling losses than ensuring all demand is met, which could lessen the per unit price.
The transmission constraints are not going anywhere soon. It won’t be until 2030 that a meaningful base load from hydel sources gets going in the North. A stagnant (or falling) demand, a broken transmission system, inefficient distributors, an overly reliant federation on electricity taxes, and a criminally low growing economy – are all ingredients that could push Pakistan from energy poverty to new depths. Someone, somehow must put the house in order.