Pakistan could cut the effective cost of fuel to around Rs30 per litre equivalent by switching to electric vehicles powered by solar energy, a massive drop from the current petrol prices near Rs300, showing gaps in energy policy.
The remarks were made by Atif Mian, a noted Pakistani-American economist and currently a professor of economics at Princeton University.
“Petrol at Rs30/litre in Pakistan sounds crazy. It is not. What is crazy is the policy failure that prevents it,” said Atif in a post on a social media platform on Saturday.
Atif maintained that petrol prices, which are currently around Rs300 per litre, excluding government levy, can effectively be Rs30 per litre.
“People do not consume petrol for its own sake; they use it to travel. The average Pakistani rides a motorbike. A fuel-efficient motorbike can travel about 60km on one litre. An efficient electric scooter can travel about 30km per kWh, so it needs only 2 kWh to cover the same 60 km,” he said.
The economist highlighted that in Pakistan, which is one of the best places in the world for solar, with an all-in LCOE (Levelised Cost of Energy or Electricity) cost of around 5 cents per kWh. The electricity cost is 10 cents or Rs30 per litre.
“The Rs 30/litre calculation remains the same for cars,” he said.
Atif said that the 300-versus-30 gap is the cost of bad policy. “It reflects billions of dollars of savings that could instead finance EV infrastructure: charging, distribution, battery swapping, and smart pricing software, etc. - boosting much-needed domestic investment,” he said.
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Highlighting the advantages of solar, Atif said that since being ‘highly modular’ does not need massive scale to get reasonable efficiency.
“That creates business and employment opportunities for small domestic power producers. Instead, Pakistan leaned into large fossil-fuel plants financed by dollar-denominated borrowing and guaranteed returns.
“Local firms face credit constraints, but solar creates a natural collateralizable cash flow through electricity sales to the grid. With the right regulatory framework, this could have unlocked large private domestic investment and employment.
“Battery swapping is another area where small local businesses could have emerged and scaled,” he added.
The economist maintained that an abundant solar supply will lower prices, allowing poor households and firms to shift usage to cheaper hours, which will lead to automatic demand stabilisation.
“Green technology industries could be developed domestically with the right industrial policy, easing balance-of-payments pressure while raising employment and investment.
“Instead, Pakistan chose imported-fuel power plants, protected a backwards-looking domestic auto sector, and raised electricity prices by burdening them with the fixed costs of those plants and heavy taxation, slowing EV adoption. Then came the net-metering fiasco, all to keep zombie power plants alive.
“Pakistan’s energy policy may be the clearest example of a broken nervous system. I hope someone fixes it, because people are paying the price, 300-versus-30,” he concluded.
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