In the current era of technological advancements, electricity is still considered a blessing in Pakistan. Within South Asia, Pakistan has most severe power shortages as companies report outages everyday with an average duration of 13.2 hours. These observations were made in a working paper of the World Bank (WB).
Subsequently, the figure mentioned is sufficient enough to present an upsetting image of the future of industrial development in the country. According to WB’s working paper that estimated the impact of electricity shortages on firm productivity in Pakistan, high price and institutional distortions have contributed in the current power crisis in the country.
Moreover, approximately 75% of the firms in the country have identified lack of electricity as a major constraint to their operations and growth. The working paper noted that “the effect of power outages on value added is more than twice as large as that on revenue.”
According to the paper, a 10% surge in the duration of power outages on average leads to a 0.14 % drop in total revenue of a firm and 0.36 percent drop in the value added.
Furthermore, aging infrastructure, overloaded transmission and distribution system also contribute to hefty losses in the network. For instance, average transmission and distribution losses peaked to 21% of all the electricity generated during FY14.
Additionally, reliance on oil based power generation leads to higher cost of electricity, which further worsens the circular debt issue. Despite the fact that Pakistan has great hydropower and substantial wind & solar potential, development in renewable energy has been stagnant over the last decade.
The paper revealed that even though companies can rely on generator to reduce the impact of power outages, the impact of shortages on value added is very difficult to be maneuvered, because generators are usually less efficient and much more expensive than normal electricity.