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884MW adding to the electricity surplus- marginal pricing is the way forward!

884MW adding to the electricity surplus- marginal pricing is the way forward!
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March 08, 2024 (MLN): Brace yourself. The power tariff will go up further. Not that it is news nowadays. Policymakers conveniently blame the IMF, currency depreciation and high fuel prices.

Little do they ever tell that it is their inefficiency as well. Sometimes things are as clear as writing on the wall but lack of ownership and responsibility is the sheer cause of misgovernance. 

Large ticket infrastructure projects have a long gestation period for any new head of the department, division, ministry and cabinet to be aware of. Pakistan had planned a plethora of power generation companies – imported coal, local coal, hydel, nuclear and LNG – but never knew who would consume the molecules. Only long-term growth rates were forecasted. 

Did you do sensitivity to what would happen if economic growth slows, policymakers toy with boom and bust and let currency/current account deficit explode and fuel prices witness high standard deviation?

Was there any provision for delaying the offtake in such measures? Now 884MW would be added again – for whom?

Though hydel as a renewable source is cheaper and adds to water security, there must be a comprehensive plan to uplift the watts.

The government previously introduced a marginal pricing mechanism to enhance industrial consumption – residential consumption isn't elastic which is a very good idea to spur growth, reduce the cost of average unit consumed, control circular debt, create jobs and enhance tax revenues. 

The no-growth debt trap Pakistan is facing requires bold, aggressive and risk-taking policy making. The status quo will only crawl the masses to immigration, extinction or subsistence. Old inefficient thermal plants need to be bid farewell to or move towards the take-and-pay model.

Problems won't be resolved until DISCOs are dropped from the domain and handed to the private sector. PM must not give to provinces. Cheaper power, no subsidy and an industrial sector can pull Pakistan from the rabbit hole of oblivion. 

The author is an independent economic analyst and writes on Twitter and Linkedin.

Posted on: 2024-03-08T19:18:31+05:00