Despite the launch of new power projects, Pakistan continues to lag behind in much-needed energy reforms. According to a World Bank study, the current bill collection mechanism continues to benefit the richest households, as the correlation between measured power consumption and household welfare remains relatively weak. Despite cuts in tariffs on heavy users, electricity subsidies continue to be poorly targeted. Residential consumers are charged tariffs based on monthly electricity consumption, with the most generous subsidies provided to households with low and moderate usage. The effectiveness of this targeting mechanism as a social protection policy relies on the premise that measured electricity use is closely related to household welfare. Based on qualitative research, the study finds that in spite of the subsidies, low- and lower-middle income households in the country struggle to afford their basic electricity needs.
Pakistan’s current energy mix relies heavily on the furnace oil for the production of electricity. Despite the record low oil prices in the international market, the end consumer in Pakistan has not been able to benefit due to the delay in structural reforms and faulty price mechanisms.
The PML-N government has taken several loans to tackle the energy crisis since it took office in 2013. Although a number of energy projects have been initiated, which if implemented on time can help alleviate the country of the miserable power outages; a comprehensive energy policy still has not been formulated yet. Other than launching power projects, Pakistan needs to improve its power transmission network as well as the structural reforms at the institutional levels.
Pakistan completed IMF’s bailout programme in 2016 despite not achieving all the targets as outlined under the reforms agenda of the bailout package. Energy sector reforms constitute a major portion of these unaccomplished objectives. Increasing bills recovery, as well as the privatisation of the distribution companies, was a major part of the reforms suggested by the IMF. Although the government was able to withdraw subsidies amid low oil prices in the international market, the overall billing mechanism remains tilted in favour of the richest class. Even after the recent reforms, the group receiving the greatest share of electricity subsidy expenditure remains the richest 20 percent of the population. The average subsidy for the richest 20 percent of households is 40 percent higher than that for the poorest 20 percent.
This situation portrays a grim picture of the governance situation in the country. According to the study, there is also a misperception on the power authorities among the masses. Most people do not even know about the massive subsidies being offered by the government over the years. Hence the reduction of those subsidies in recent times amid falling oil prices did not lower the electricity prices, creating a perception that the government is overcharging the people. High electricity prices had also resulted in an increase in illegal connections.
The study shows that the consumers are primarily concerned about the affordability, reliability of supply, and issues related to transparency and accountability. Consumers do not trust the accuracy of their bills and perceive corruption in their interactions with service providers. What is the need of the hour are the structural reforms as well as the grievance redress mechanisms for the general public to educate the masses of the technicalities of the billing mechanisms to change the perceptions as well as tackling to curb the malpractices including illegal connections. *