High electricity prices in Pakistan are unlikely to decrease due to the government’s reliance on revenue from the power sector and petroleum products, alongside the unchecked freedom given to independent power producers (IPPs).
These insights were shared by experts during a media briefing titled “Pakistan Energy Crisis and IPPs: How Overbilling Impacts Quality of Life and Pathways to Solution,” held at the Applied Economics Research Centre (AERC), University of Karachi, on Thursday.
**Revenue Generation from Electricity and Petroleum:**
– The government has turned electricity and petroleum products into significant revenue sources.
– The independent power producers (IPPs) operate without strict oversight, affecting the cost and quality of electricity.
**Impact on Households:**
– Overbilling and high electricity costs are severely impacting poor and middle-income households, affecting their spending on health, education, food, and transportation.
– Dr. Aamir Siddiqui, assistant professor at AERC, mentioned that electricity charges are unlikely to decrease soon due to the government’s revenue generation strategy. Despite having around 100 IPPs, electricity prices continue to rise.
**Excess Power Generation and Loadshedding:**
– Pakistan generates more power than its demand, yet loadshedding persists.
– The government has not renegotiated agreements with IPPs to improve quality and services, even though payments are made in dollars or equivalent local currency.
**Agreements Favoring IPPs:**
– Dr. Muhammad Sabir, principal economist at the Social Policy and Development Centre Karachi, pointed out that agreements with IPPs were made without considering public benefit. Many IPPs are paid in full even if they do not supply power.
**Effect on Low and Middle-Income Households:**
– Dr. Fauzia Sohail, assistant professor at AERC, noted that the residential sector is the major consumer of electricity, and low and middle-income households are most affected by high costs and overbilling. Increased electricity charges reduce spending on essential needs and push some low-income people below the poverty line.
**Need for Compensations and Reforms:**
– Dr. Sohail emphasized the need for government compensations for low-income households in areas like health and education to mitigate adverse effects on people and the economy.
**Issues with K-Electric:**
– M.Phil scholar at AERC, Rao Asad, highlighted that K-Electric has suppressed electricity demand through overbilling due to its inability to meet the city’s demand, leading to frequent loadshedding.
**Ownership and Lack of Audits:**
– Many IPPs are owned by individuals who are or have been in government, preventing strict action against underperforming IPPs.
– Dr. Asghar Ali, who moderated the event, claimed that IPPs in Pakistan have never been audited, contributing to the current crisis.
**Proposed Solutions:**
– Experts suggested negotiating with IPPs, considering nationalization, providing financial and social support programs, and splitting K-Electric into separate generation and distribution companies.
Director AERC Prof Dr. Nooreen Mujahid and CEO of Ataleeq Foundation Shahzad Qamar also spoke at the event, emphasizing the urgent need for these measures.
