Home / This Week / Research / Electricity price misery

Electricity price misery

Increased population growth rate causes increased energy requirements in Pakistan which is growing rapidly. The present Government of Pakistan has focused to ensure accessibility and security of sustainable supply and delivery of energy service along with the development of natural resources and minerals. According to the Finance Ministry, ensuring energy security with affordability and universal access based on indigenous resources is the goal of government. The present Government of Pakistan has accepted with the International Monetary Fund (IMF) to additional hike the electricity tariff by the end of August 2019 on the basis of quarterly adjustments. An adequate pricing structure according to the IMF, reflective of costs is necessary to make the sector a more attractive investment opportunity and to eliminate the accumulation of circular debt as new capacity comes into the system. It is expected that the rise would be of Rs2.5 per unit from August 2019. Current statistics showed that the households consuming 300 units or below are insulated from yearly tariff rises. The officials would continue with this practice and moreover allocate for this year a new subsidy equivalent to 0.1–0.2 percent of Gross Domestic Product (GDP) to insulate those same consumers from the impact of the presently launched quarterly tariff adjustment.

Energy is an integral part of the economic order of Pakistan because energy demand and economic growth share a tight bond. Pakistan is overcoming a severe energy crisis that has directly and indirectly affected all sectors of the economy especially in terms of the evolving energy-mix. The energy side bottlenecks have corroded the economy of the country in the past as well. In term of energy-mix, Pakistan reliance on oil reached 43.5 percent in FY1998 and FY2001. For the FY2018, oil reliance has reduced to 31.2 percent. Similarly, hydro had a 13.1 percent share in FY1998, which is standing at 7.7 percent in 2017-18. Though the declining share of oil is a welcoming sign due to less burden on the national exchequer, the diminishing share of hydro represents the shortsightedness of policy as well as the inability of successive governments to undertake such capital-intensive projects in a timely manner.

Statistics also showed that three initiatives have been suggested through IMF which include, taking a sufficient pricing structure reflective of costs, automatic quarterly adjustment of tariffs with a first tariff rise of over 10 percent to generate Rs 150 billion more revenue. A second quarterly adjustment will take place before end-August. According to the statistics, in the federal budget, the amount of net taxes was explained to be Rs733.50 billion but the parliament was told the amount as Rs 516 billion.

 

Moreover, economists revealed that Pakistan has been facing enough economic issues on the back of large fiscal and financial needs, with weak and unbalanced growth. The monetary added, it will aim to tackle long-standing policy and structural weaknesses, restore macroeconomic stability, catalyze significant international financial support and promote strong and sustainable growth through the program. It is also suggested that strong financial support to the authority’s policy attempts through Pakistan’s international partners is necessary to meet the large external financing needs in the coming years and permits the program to attains its objectives On the other hand, the immediate focus of the Government of Pakistan has remained on reducing the losses and rising effectiveness of the whole value chain.

res1pic1

Launch of anti-theft campaign with the formation of special task forces in Punjab and Khyber Pakhtunkhwa has been launched since 13th October, 2018 within a short span of 3 months (September to November 2018). A total of 6880 cases were detected according to Ministry of Finance resulting in registration of 1441 FIRs with the amount of detection bill charged reaching Rs 267.571 million. No doubt, the government has successfully removed bottlenecks on the generation side of electricity during previous government. But rising energy prices means the inflation is rising as taxes have been implemented on the consumers’ goods in Pakistan which cause increased poverty.

Check Also

Market Indicators

Market Indicators

Market indicators are a series of technical indicators used by traders to predict the direction …

Leave a Reply