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DISCOs and price hikes

The rising costs of electricity due to the non-availability of the right kind of fuel is irking consumers. DISCOs are helpless as the whole process is under the government’s control.

This increase has been triggered by long-term trends such as underinvestment in natural gas and clean energy supply, and short-term developments like reductions in natural gas. Such trends have prompted the government to pump up subsidies to protect business communities leading export-oriented operations against the financial strain. As a result, the energy crisis is now contributing to the rising inflation across the country.

The government is now struggling against the current energy price spike, which has been driven by a mix of increased demand and supply disruptions caused in the wake of fluctuating exchange rates and general instability in the country.

It is important to note that if the input prices keep rising as many analysts expect, without any replaceable raw materials such as RLNG and natural gas, they could take a bite out of economic growth and force power outages and load shedding. In the past recent months, rising tariffs caused protests across the country. People in large numbers protested against exorbitant hikes in electricity bills, rising electricity tariffs and various miscellaneous taxes.

Also, electricity distribution companies have not been able to procure natural gas, despite specific instructions from the court. One must note that DISCOs are powerless in such a situation – in the sense that higher rates will not solve the energy shortage, nor are they responsible for leveraging one industry over another. In all fairness to them, they have little choice but to at least appear to be addressing the crisis they all see coming. We can hope that they might make good decisions for the public.

While both residents and commercial users are affected by fuel-cost adjustments and high tariffs, export-oriented industries are being provided natural gas, enjoying cost savings and operational efficiencies, and disrupting the industry norm. Distribution companies are facing the brunt of this privilege extended to these industries.

The reality here is that Pakistan faces an energy crisis that is mainly a product of the government’s decision-making. A shortage that has been artificially created by government restrictions on energy production, distribution, and usage. Those policies were formed beyond any external coercion, and they have played a major role in creating the crisis.

Such economic policies of the incumbent government will fail to control the rising and the economy. Pakistani authorities must step up and take measures to contain the price hikes. They must shift away from policies that directly seek to limit prices. This approach will ensure that the support provided is fair and effective on the part of the government. And while all of us agree that the global fuel prices have also had an impact on the local scenario, the government must realize that it is a driving factor behind the worsening outlook for both growth and prosperity.

In addition, broad and equitable access to alternative energy sources is a prerequisite for an effective and publicly acceptable longer-term strategy for the state to direct and distribution companies to implement. The state must devise a plan for an ‘emergency intervention’ into the collective’s power markets in an effort to stabilize electricity prices.

Email: Sara.amj@hotmail.co.uk

Sara Danial, "DISCOs and price hikes," The News. 2022-12-06.
Keywords: Economics , Economic growth , Economic policies , Economy-Pakistan , Exports , Taxes , Tariffs , Pakistan , RLNG , DISCOS