Exorbitant electricity bills are not the main problem, though it is hard to agree when over half the salary is spent paying it. The issue lies in the breakup of consumption — households, for over two decades, have been the main consumers of electricity instead of productive sectors such as industry.
In India, for example, residential consumption of energy is 24pc, industrial is 42pc and agriculture accounts for 17pc, according to India Energy Portal, signalling industrialisation.
Pakistan’s economic progress has been lopsided. Economic theory dictates that agriculture is the main contributor towards GDP, than as the nation develops, industrialisation contributes towards the economy, and eventually, the service sector becomes the main contributor.
However, Pakistan has experienced pre-mature de-industrialisation. While agriculture accounted for about a quarter of GDP in FY23, the services sector had the lion’s share at 54.3pc, and industries contributed 22pc.
Worst still, large-scale manufacturing that should be guzzling electricity and manufacturing output that could contribute to growth, increase in employment and exports was at a measly 11pc in FY23.
Thermal — power generation through oil, gas and coal — accounts for 46pc of electricity generation. As local resources are depleted, the government depends more on imports. An increase in imports, depreciates the rupee, making electricity more expensive and fueling inflation.
Inflation hits economic growth as people’s purchasing power decreases while the cost of production for industries rises. Exports decline, pressure on the exchange rate rises, and the cycle continues unabated.
Since the consumption of electricity is led by households, the strain on imports does not produce value-added outputs that would negate the increase in costs through exports and domestic manufacturing.
Meanwhile, line losses and theft put additional pressure on tariffs already inflated through subsidies for others, surcharges and taxes.
The need to strengthen local industries and increase production from domestic consumption and exports is a worn-out refrain. As the change in electricity consumption shows, little has changed over the 25 years.
Published in Dawn, The Business and Finance Weekly, September 4th, 2023