Fuel and lighting: High prices, consumerism eat up more of people’s incomes

Household spending on this category surges 178% in a decade.

KARACHI:

Average monthly spending on fuel and lighting by a Pakistani household has increased by 178% to Rs1,470 from Rs529 over the past decade, mainly due to a sharp increase in prices of petroleum products, electricity and gas as well as change in consumption patterns, a comparison of Pakistan Bureau of Statistics’ figures for 2010-11 and 2001-02 shows.

In the fuel and lighting category, bulk of the expenditure was made on electricity, firewood and gas, which made up 90% of total spending of a household in the category, while the rest was spent on candles, charcoal and farm waste.

People in urban centres spent up to 95% on electricity and gas while rural residents consumed 60% of their income on power and gas. Rural people also spent a big amount on firewood, dung cakes and kerosene oil, accounting for up to 40% of their total expenditure.

However, in rural areas, the share of electricity and gas had been increasing while demand for kerosene had declined. The use of firewood had been stagnant for the last 10 years.

Analysts are of the view that the major reason for the increase in expenditure was the rise in fuel and electricity prices, especially over the last few years.

JS Global Capital analyst Atif Zafar pointed out that prices of electricity had increased sharply in the last few years as the government gradually reduced subsidies from the power sector, which pushed up household spending.

“Another factor was the rise in consumerism which shot up during General Musharraf’s regime,” said Zafar. “Surge in sales of fridges, deep freezers, microwave ovens, geysers and air conditioners contributed to the increase in gas and electricity consumption, especially in urban centres.”

The lowest quintile of population spent Rs968 on fuel and lighting while the top quintile spent Rs2,079. This meant that the top 20% of population spent 54% more than the lowest 20%.

Average urban spending on electricity and gas stood at Rs1,691 per month, up 20% compared to the rural average of Rs1,354. The reason given for heavy expenditure in urban centres was high consumption of electricity, which accounted for most of the spending.

Province-wise breakdown

Punjab – The most populous province of the country spent the highest amount among all provinces on fuel and lighting in 2010-11. Its average monthly spending stood at Rs1,582.

Interestingly, both urban and rural figures of Punjab were higher than the national average. Average urban expenditure was 13% more than the country’s urban average while rural expenditure was 4% higher than the national average.

Commenting on the consumption pattern in Punjab, Invest Capital Markets analyst Khurram Schehzad said the reason for high consumption of electricity and gas was the province’s growing economy and better infrastructure compared to other provinces.

“Punjab is more than half of our economy and the increase in demand for electricity there is a good sign,” he added.

Khyber-Pakhtunkhwa – Contrary to the common perception that Sindh should come after Punjab because of its bigger economy and bustling cities like Karachi and Hyderabad, Khyber-Pakhtunkhwa came second as people in this north-western province spent more on fuel and lighting.

Average monthly expenditure in the province was Rs1,572, up 6.5% from the national average. Urban average stood at Rs1,610 while rural average was Rs1,564, which showed a very narrow difference between urban and rural spending.

Balochistan – Even this less developed province’s spending on fuel and lighting was more than Sindh. Households spent an average Rs1,221, down 17% from the national average. Its urban and rural expenditures stood at Rs1,262 and Rs1,209 respectively.

Sindh – Average expenditure on fuel and lighting in the province was Rs1,184, down 19% from the national average. Its urban average was Rs1,352, but the rural average was the lowest at Rs1,000.

“The slow growth in electricity and gas consumption in Sindh reflects lower infrastructure spending compared to Punjab,” Schehzad said.

Published in The Express Tribune, July 30^th, 2012.