THIS is with reference to the report ‘Govt unveils winter package to boost power consumption’ (Nov 9). The winter package aimed at providing 18-50 per cent discount on incremental usage of power to the different categories of electricity users is a timely and wise decision.

The energy demand in Pakistan is highly erratic, which considerably drops during the winters to 15,000MW vis-à-vis the installed capacity of around 45,885MW (2022-23), rendering a substantial unutilised component. Interestingly, the consumers are always charged for the unutilised power capacity under agreement with various independent power producers (IPPs).

Against this backdrop, the lower elec-tricity rates offered for three winter months (December to February) on incremental usage of power, especially to industries, can boost electricity consumption, reduce capacity payments, and induce economic activities to create overall socioeconomic benefits.

The power prices have a strong bearing on the industrial output, and the persistent increase in power tariffs over the last two years on average has resulted in massive industrial contraction, leading to the de-industrialisation and closure of industries.

Moreover, the statistics of the last two years reflect reduced industrial produ-ctivity in different manufacturing sectors, such as textiles, including cotton yarn as well as cloth, non-metallic mineral products, iron and steel products, auto-mobiles, paper and board, beverages and electronics.

Prominent industry representatives and trade bodies have been pointing out this fact, and have time and again asked the government to provide electricity at a competitive rate of 9 cents per kWh instead of the current rate of 16-17 cents.

They have further stressed the need to terminate the existing agreements with the IPPs, to do away with the capacity charges, eliminate cross-subsidisation and rationalise tariff design to achieve the targeted goal of $100 billion exports in the next five years.

The discounted supply of electricity at 18-37pc in the wake of the winter package can benefit the industry, which can curtail production and operational costs, increase production surplus, and enhance comp-etitiveness to increase market share. The government has rightly introduced a flexible tariff structure during the winter months, which reflects the intention to boost cost-efficiency that can comple-ment seasonal demand variations besides ensuring maximum and stable utilisation of generation capacity.

The policy of demand-side supply management has failed to produce positive results. Therefore, the demand for max-imum consumption of unutilised capacity of power may be created by offering special tax and tariff concessions, espe-cially for the export-oriented sectors.

Presently, the industrial sector is burdened with 37-40pc of electricity charges in terms of government taxes, levies, duties and surcharges, and the incentives can retard the existing negative power sales’ growth and consumption.

The relief in terms of winter package is a small step in the right direction, but affordable and reliable energy supply to the industrial sector for long-term economic growth is only possible through radical and comprehensive power-sector reforms addressing critical challenges, such as institutional weaknesses, inade-quate transmission capacity, corrupt and inefficient distribution companies (Discos), neglect of optimal energy mix, theft, recovery, privatisation of energy generation and transmission.

Besides, the focus should be on mode-rnisation, including investment in smart grid technology, and advanced metering system.

The inefficient power sector costs the government Rs1,190 billion, which was 1pc of the estimated gross domestic product (GDP) in the 2024-25 fiscal.

On its part, the industrial sector should also promote modern processes and adopt the policies of energy conservation as well as efficient business processes.

Shahid Ali Abbasi
Karachi

Published in Dawn, November 29th, 2024