High cost of power

Pakistan's high electricity cost is crippling consumers and the economy.

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The high cost of electricity in Pakistan is a critical challenge that is affecting all categories of consumers – domestic, commercial and industrial. This has not only strained domestic budgets and caused social commotion, but has also affected the national economy, by way of increasing the cost of manufacturing, thereby making our exports uncompetitive in the international market, and hence contributing to our aggravating balance-of-payments problem. Such widespread is this spiral.

At a huge 45 rupees per unit, equivalent to $0.16, the base price of power in Pakistan is far higher than other countries in the region. For perspective, in India, our next door neighbour, a unit of electricity costs 7.11 Indian rupees or $0.084 – which is half as much as ours. While in Bangladesh, our former eastern wing, the power tariff is 12 taka which comes to something around $0.1008.

It is, however, a matter for satisfaction that the authorities have admitted, albeit very late, that by addressing inefficiencies and optimising utiliaation of excess capacity, consumers can be relieved of some financial burden. In a report presented to the government last week, Nepra, the power sector regulator, has revealed that the average net production cost of electricity stands at Rs7.62 per unit. Nepra has proposed a Rs25 per unit cut in the power tariff, suggesting that the government revise capacity payments and eliminate surcharges and, thereby, bring the per unit cost of power to Rs20.04 from Rs45.06.

It's no revelation that illogical capacity charges and inefficiencies in the power sector – reflected in rampant theft, elusive recovery targets and high transmission and distribution losses – are among the factors contributing to a high power tariff in Pakistan. The power tariff, in a way, is also a barometer of governance quality in a country. Thus, by improving governance in power distribution and increasing accountability and oversight, the government can alleviate the unjustified financial burden on electricity consumers.