Pakistan has an installed capacity for electricity generation of 41,500 MW, which is a significant amount. With just 22,000 MW, the nation’s transmission capacity, however, remains far behind. A substantial energy shortage is caused by this mismatch, especially during the peak season when the country needs 27,000 MW of power.
Even during the winter, the demand is considerable, averaging 22,000–23,000 MW. High line losses further make the energy shortage worse, leaving Pakistan with a staggering 7,000 MW gap at peak demand.
In Pakistan, electricity theft is rife and has only made the country’s energy problems worse. An astounding 467 billion rupees in power have been stolen in the last 15 months. In addition to wasting precious resources, this widespread theft of power raises costs for law-abiding consumers.
A disturbing and unfortunate trend was seen in Pakistan during the summer of 2023: there was an increase in suicides among energy users who were unable to pay their mounting bills. These situations reached a particularly painful crescendo in August, when power prices witnessed a sharp increase that drove many people to the breaking point.
Tragically, as they struggled with these debts, people from all walks of life committed suicide. They included an old guy who committed suicide by jumping off a bridge in Islamabad, a young man who shot himself to death in Faisalabad, a payphone operator who lit himself on fire in Peshawar, and an Islamic cleric who died from a deadly drug overdose in Sheikhupura.
One tragic story from Jahanian garnered media attention when a mother of four turned to poison because her family got a bill for 10,000 Pakistani rupees ($35) that they were unable to pay. These extra costs include petroleum price increases, income and sales taxes, and levies for state-run radio and television stations. The total amount owing is far more than the actual cost of the power used due to the cumulative impact of these taxes.
Beyond only homeowners, these increased expenditures are having a significant negative effect on small and medium-sized businesses (SMEs). The enormous losses resulting from these electrical costs are forcing several enterprises to close their doors.
Due to the intolerable prices, a small business owner who is not willing to disclose his name in Rawalpindi was forced to close his shoe store. We’ve owned the store for generations, he lamented. I had no other option, however. In addition to the power cost making it hard for me to keep it running, there are many others in the market just like me who are having trouble finding clients. He said, “The whole city, the entire nation, is trying to pay their power bills; many are battling to purchase food for their family, further emphasizing the severe situation. Who has additional money to spend on shopping? Unfortunately, even locally produced shoes are now considered expensive in Pakistan.
Widespread demonstrations over the rising energy rates have been organized by traders across Pakistan. With some people resorted to burning their bills during protests against K-Electric, Karachi has become a focal point for anti-electricity pricing rallies. For other people, the solace brought on by these demonstrations hasn’t lasted long.
Due to Pakistan’s strong dependence on thermal energy, which makes about half of its energy mix, producing electricity is expensive. Pakistan’s energy industry is strongly connected to international markets due to the usage of imported fuel and equipment in the generating process. The cost of producing power has increased as a result of factors like the conflict between Russia and Ukraine and the depreciation of the Pakistani rupee versus the dollar, which has led to a rise in electricity prices.
The circular debt of Pakistan, which is now estimated to be worth about 2.6 trillion rupees, represents almost 7.8% of the GDP of the nation. The weight of this enormous debt has a significant impact on Pakistan’s economic development.
The International Monetary Fund (IMF) has recommended the government to impose high power rates in order to solve this problem, which has resulted in the introduction of nine various levies, including a GST of 17% on energy bills.
To address its energy constraints, Pakistan made agreements with Independent Power Producers (IPPs) in 1994. These agreements, however, establish prices that are far higher than the average worldwide. The same pattern was followed by subsequent IPP agreements in 2002, 2009, and 2014. These contracts, which are based on the “take or pay model,” require payments to IPPs regardless of how effective they are, which results in exorbitant prices.
IPPs are paid in US dollars, which presents another difficulty given the depreciation of the rupee. Furthermore, prior administrations neglected to make investments in the transmission and distribution sectors, focusing instead exclusively on the construction of new manufacturing facilities.
A variety of levies that have been enacted, in part in accordance with the International Monetary Fund’s (IMF) recommendations, have served to further aggravate Pakistan’s rising power costs. Since the powerful Pakistan Army is mostly immune from fiscal responsibility, Pakistan’s ongoing failure to fairly tax its rich residents is a major contributor to the country’s economic troubles.
Due to this oversight, organizations with links to the governing elites now control the electricity industry. Wide-ranging measures are necessary to address Pakistan’s energy crisis:
- To reduce the effect of currency fluctuations, the government should rewrite IPP agreements to transition from capacity payments to production payments and to local currency payments.
- The practice of giving public employees free power, which costs the nation billions of rupees, should be stopped or regulated to a realistic usage level.
- In order to help low-income families fulfill their electrical demands, subsidies should be implemented.
- Give DISCOs the authority to take harsh measures against this danger.
- To lessen its dependency on pricey imported fuel, Pakistan should give priority to renewable energy sources including hydroelectric, wind, and solar power.
- To guarantee logical and sustainable energy policy, governments should engage the public and technical specialists in the decision-making process.
Pakistan can ease its energy crisis, lower power rates, and ensure a better and more sustainable energy future for its population by putting these measures into place and switching to cleaner and more efficient energy sources.
In a nation where record-breaking inflation is already a problem, power costs have increased much more as a result of several new levies. Ordinary Pakistanis will continue to struggle to pay for their basic needs until such changes are enacted, underlining the urgent need for complete change in the nation’s energy policy.
