Pakistan is currently undergoing the worst power shortage in a decade, if not more. The shortfall earlier this week, climbed up to 9,000 MW, of which more than 80 percent is driven by generation constraints. In simpler words, there is not much fuel to burn. In more simpler words, there is not much fuel that Pakistan can afford to import and run power plants near full throttle.
The ex-Prime Minister Shahid Khaqan Abbasi made it clear the other day appearing on a TV show, that load shedding is going to stay as any effort to reduce it will cost Pakistan $150 million per hour. While, it is true Pakistan’s dire straits make it tough to arrange for imported fuel needed to generate enough power to satiate demand in the rising temperatures. The $150 million per hour is not true. Not by a long stretch.
To put things in perspective, Pakistan’s highest fuel bill (local and imported) touched Rs198 billion for last month, which is close to $1 billion for the whole month. At $150 million per hour, the annual fuel bill comes around $1.3 trillion – thrice the size of Pakistan’s economy. One hopes that is an honest mistake, and not the basis of decision not to import, by Mr. Abbasi who also happens to be leading the Task Force on energy matters,
On the other hand, the finance minister was heard defending his earlier claim of selling electricity at Rs12/unit that he made two months before coming to power. The twist is that he wants all industry to shift to the grid, and that will solve the issue, and base tariff increase would not be as much. Only that, it is not as simple as some would make it.
Industrial consumption accounts for no more than a quarter of all consumption. No amount of shifting will solve the problem, particularly in low consumption months, where capacity charges per unit becomes a huge drag. The base load revolves around imported fuel and will continue to do so in the medium term. The industrial electricity needs will not magnify all of a sudden, that too, at exorbitant rates.
Recall that some industries have been burning imported coal from Afghanistan to meet the energy requirements, and the government was also seen boasting of the same. And in the next breath, they propose the idea of shifting entire industry to the grid. The finance minister has also hinted at selling power and gas to industries at cheaper rates.
For that to happen, a sizeable subsidy will have to be set aside for industrial support, which was not the case in the Budget presented on June 10, 2022. With base tariff revision just around the corner, it is best to send the right signals and make adequate room for subsidy, if need be.
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