Daily Times

The current high cost of electricity in Pakistan has undoubtedly hurt domestic, commercial, and household consumers’ ability to pay as well as Pakistan’s industrial and economic growth. As a result, the country’s economy will suffer greatly, industries will relocate outside of the country and foreign direct investment will decline. Therefore, the federal government of Pakistan must act quickly to lower electricity prices before it is too late.

Pakistan is just one of the few nations that produce costly electricity as a result of several factors, such as a heavy reliance on imported fossil fuels, an inefficient energy mix, significant losses in transmission and distribution, and long-term problems like circular debt and ineffective regulations. Costs are further increased by obsolete infrastructure, inefficient power plants, and a lack of use of native resources like coal and hydropower. Moreover, complex tariff arrangements and foreign exchange rate changes drive up the cost of electricity. The nation’s spiraling inflation is mostly caused by high power costs, which should be a major source of concern for both the federal and local governments.

The base tariff for home consumers’ energy bills has been raised by the government to (PKR) 48.84. The cost of nuclear (24%), coal (19%), and gas (23%), on an annual basis, increased the cost of fuel. The country’s citizens, who are already feeling the strain of high inflation and sluggish economic growth, are getting more and more agitated over rising electricity rates.

Pakistan is just one of the few nations that produce costly electricity as a result of several factors, such as a heavy reliance on imported fossil fuels, an inefficient energy mix, significant losses in transmission and distribution, and long-term problems like circular debt and ineffective regulations.

Many countries, including our neighbor and time-tested friend China, have implemented tariff systems that do not involve capacity payment unlike we have in Pakistan. The industrial base’s contribution to electricity consumption ensures that power generation is reasonably balanced over the winter and summer months. The state of affairs in our country at the moment is not comparable. When combined, Pakistan’s existing capacity is comparatively excess, hence planning is necessary for renewable energy sources like wind and solar power.

The electricity industry’s circular debt has nearly doubled to over 2600 billion in the last five years, and it continues to rise. It has plunged into an abyss that would eventually consume both Pakistan’s sustainable economic growth and social cohesiveness. The fact that Pakistani residents’ monthly power bills now outweigh their rent is a highly worrying development for the country. Among the main issues fuelling the current electrical crisis are taxes, line losses, excess electricity, and the IPPS capacity payment. The following suggestions and methods can be used to deal with this problem:

1. The federal government should not in any way extend the tenure current IPPS agreement; instead, it should be examined by performing forensic audits of all these agreements through renowned international and local technical experts in all legal and technical areas such as (heat, capacity, tax, oil, and supply of electricity etc) over the course of the next three to six months, with the reports being made public.

2. Time-limited cost-side reforms include: bringing captive power demand into the grid; reviewing the terms of power purchase agreements; extending the conversion of publicly-guaranteed energy; improving DISCO performance through either privatization or long-term management concessions; and continuing to improve transmission infrastructure. Converting PHPL debt into less expensive public debt is crucial and vital for the nation’s overall interests.

3. Pakistan should, like other nations, gradually enhance its capacity for wind, solar, and hydropower and create high-quality energy blends. For the benefit of the country, political parties, federal or provincial governments should settle the technical or political dispute surrounding the Kalabagh Dam. The early establishment of dam is very crucial to affordable electricity and the country’s future development of sustainable agriculture.

4. Pakistan now uses a “take or pay” price system for energy and capacity payments in the electricity industry. The generation of solar projects would be reduced during the winter, when there is a low load demand, but the need to make the capacity payment would still exist, which would exacerbate the decline in power debt. Industrial development on a fast track basis is required to drive electricity demand in order to tackle the issue of idle power plants during the winter. This element should be examined both technically and practically.

5. An updated power grid, energy storage, and correction devices are necessary for solar projects. Pakistan should therefore design new solar projects taking into account the consumption demand and grid structure, enhance the grid’s capacity for power transmission and distribution as soon as feasible, and generate further economic gains by reviving underutilized, low-cost power plants.

6. Power losses are mostly generated by three things: human losses from electricity theft, technical losses from outdated equipment, and management losses from a lack of systematic grid planning and deployment. As a result, these things need to be upgraded and replaced on a war footing basis.

7. Pakistan has serious technical difficulties particularly in the area of electricity dispatch management.. The transmission dispatch from north to south is firstly out of proportion. Many major north-south electricity transmission channels now have weak grid stability and thin structural integrity. The NPCC must restrict the operating load since the transmission lines are unable to carry power at maximum capacity. Although the northern-south transmission capacity has long been stuck between 2,500 and 4,500 MW, the installed capacity of the southern power system is more than 10,000 MW. Southern projects such as the Port Qasim project, the China Hub project, and the Lucky project have significant tariff advantages over the large number of oil and gas units in the northern load central area. However even if they have the advantage of tariff, they are kept on standby for a long time because the electricity cannot be sent out, resulting in a waste of resources and an increase in costs.

8. The construction of essential North-South Transmission lines should be expedited to bolster grid stability and reduce overall electricity costs by ensuring the maximum operational efficiency of cost-effective power units.

9. Pakistan’s load centre areas have seriously outdated equipment. Many transformers and electricity cables are being used above their capacity, which frequently causes overheating and equipment failure. This weakens the grid’s capacity for transmission and distribution, leading to major power losses and sporadic power outages in some places as a result of equipment failures.

10. The widespread theft of electricity worsens the power waste by end users in Pakistan, causing the DISCOS to suffer significant financial losses. This forces them to implement rolling load shedding in areas where there is a high level of theft, which worsens the waste of power produced by affordable power plants.

11. Pakistan is currently experiencing a surplus in terms of generation, but the transmission, distribution, and consumption sectors are where the real problems are. Modernizing the power infrastructure, preventing electricity theft, minimizing losses, and streamlining the tariff payment recovery process are all critical. Prioritizing the renovation of important old transmission lines, modernizing important transformers and lines, and incorporating voltage and frequency regulating technology into the north-south transmission corridors are all wise economic moves.

12. Governmental intervention is another main means of addressing the issue of electricity theft; however, technological solutions can also be employed in areas where theft is common. These include installing smart meters and tamper-proof meter boxes, deploying anti-theft devices, bolstering electricity usage management, and launching awareness campaigns. Additionally, the implementation of prepaid electricity billing plan and a disconnection policy for past-due accounts should be considered. The authorities in question ought to face harsh penalties and a time-limited special court trial for their misdeeds.

13. The significant difference in load demand between winter and summer fundamentally stems from the prevailing industrial and consumption structure. Residential electricity consumption accounts for approximately 50%, with industrial consumption at merely 30%, and the remainder allocated to agriculture and commercial sectors. Under this consumption paradigm, the industrial and commercial sectors fail to provide a consistently stable demand for electricity.

14. The activation of cooling appliances such as air conditioners in summer and their deactivation in winter become the most significant variable. To fundamentally address this issue, a comprehensive advancement in industrial and commercial development is essential. By fostering economic growth to increase electricity demand, the proportion of industrial and commercial electricity consumption can be elevated, thereby mitigating the impact of residential consumption fluctuations. Consequently, advancing the second phase of the CEPC collaboration and furthering Pakistan industrial development should be paramount importance.

To put it briefly, major structural reforms, as previously stated in power sector of Pakistan, as well as those carried out by other countries, are necessary for Pakistan to become an economically sustainable and prosperous nation. Pakistan’s power crisis cannot be permanently resolved by the patchwork approach of federal or provincial government subsidies in electricity tariffs.

The writer is a practicing lawyer at Supreme Court and has served as Chairman, Federal Excise & Sales Tax Appellate Tribunal and Senior Advisor Federal Ombudsman. He can be reached at: hafizahsaan47@gmail.com