Pakistani citizens are grappling with the alarming reality of their energy expenses. The range is noted to hover between 30% and 40% of their incomes for the recent fiscal year. Independent studies reveal that 82% of households and 86% of shop owners have witnessed their energy bills surge by 20% to 50% compared between FY22 and FY23.
The additional burden of taxes and debt surcharges has left customers with a dilemma: pay for food and other essentials or pay for energy. The study also highlights the burden of taxes and public debt charges, further inflating energy bills and exacerbating the growing energy poverty in Pakistan which is a relatively new phenomenon.
This surge in energy tariffs can be attributed to macroeconomic factors, post Covid-19 economic recovery and the energy (fossil fuels) price shock due to the Russo-Ukraine war.
The impact is being felt across the globe including the United States, the UK, Mexico, Sri Lanka, Australia, and Indonesia. Reportedly, over 20 million homes in the United States are behind on their energy payments.
In Pakistan, exorbitant energy prices are causing another problem: an increased use of illegal kundas or non-payment of bills, which is creating challenges of governance. This worsens the energy poverty gap and contributes to circular debt, adversely affecting the ability of Distribution Companies (Discos) to provide uninterrupted supply.
Reportedly, another hike is expected in the per unit price of electricity also known as the base tariff as we begin the current fiscal year. Estimates range between 3 and 7 rupees. Together with FACs, quarterly adjustments and PHL surcharges, more electricity customers may feel a pinch during this year.
Access to affordable energy is crucial for socioeconomic development. At the same time, tougher economic conditions necessitate a review of our energy consumption patterns and underscore the need for correcting the course. The solutions range from simple to complex.
On an urgent front, the National Energy Conservation Policy, announced in December 2022, needs implementation as quickly as possible. At a time when energy is becoming an expensive commodity, the need to curb its usage becomes paramount. This involves driving the adoption of energy saving appliances to reduce wastage at an individual level and reducing demand by closing markets early.
Public Service Announcements need to be followed with increased vigilance on the ground to ensure enforcement. Implementing NEECA’s Energy Efficiency and Conservation Policy of 2023 in letter and spirit should be on the priority lists of every government — from Federal to local governments.
Better and smart, power subsidy programmes – a longstanding demand of international funding agencies – are the tools that ensure that the most vulnerable citizens are receiving adequate support while those who can afford the prices are asked to pay for it in full versus past practice to subsidize all spectrums of citizens – poor to rich even where systemic energy inefficiencies are prevalent.
In parallel, working with communities and their local influencers to reduce theft of electricity is also the need of the hour. Such losses ultimately bleed through the national kitty disrupting the operational capability of DISCOs.
At the same time, conscious steps are required of GOP to plan i.e., delinking Pakistan’s energy mix and include less of imported fuels and more policy agreements on increasing usage of renewables and indigenous resources into the generation mix. This includes homing in on localization of the manufacturing base of the power sector for products and solutions focusing on higher renewables dispersion.
On the international level, studying other countries which share Pakistan’s economic profile and demographics can help build localized and customized solutions. The same goes for the technical expertise, technology and support that can occur through knowledge exchange.
Solutions to fix energy poverty exist, what is ultimately required is the political commitment and wisdom to realize them.
Copyright Business Recorder, 2023