Pakistan continues to grapple with an ongoing electricity crisis despite multiple reform efforts. The power sector regulator’s recent evaluation highlights issues such as escalating costs, stagnant demand, underutilized capacity, persistent inefficiencies in transmission and distribution, and a power system that hinders economic growth rather than fostering it.
The inability to access affordable and dependable electricity hampers Pakistan’s industrialization, manufacturing sector growth, and export expansion. The high electricity tariffs act as a de facto tax on industries, making Pakistani exports less competitive in regional and global markets.
While there are calls for privatizing distribution companies as a solution, the article argues that this approach may not address the fundamental structural problems within the system. Privatization could potentially divert attention from deeper issues, especially in a scenario where tariff decisions are influenced by political factors and payment discipline is lacking.
The article emphasizes that efficiency gains in the electricity sector are typically achieved through governance, enforcement, and planning discipline rather than through ownership changes. The core issue lies in the generation contracts’ structure, with capacity payments emerging as a significant burden on the system. Pakistan’s current payment model, based on availability rather than actual consumption, poses challenges due to unrealized demand growth and underutilization of power plants.
