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Increasing demand of electricity

Electricity is one of the major requirements of a nation for economic development as it brings investment opportunities for the country. In Pakistan the nation has been facing power shortage for a long time, and with years passing and rapid increase in urbanization, the demand for power is only going higher.

Out of Pakistan’s 207.7 million population, 75.7 million people live in the urban areas and the number is increasing rapidly. Pakistan has become a zone with fastest growing urbanization in South Asia that has led the drive up in the power demand.

As per the spokesman for Power Division, Zafaryab Khan, overall power demand in the country remains at 18,908 megawatts, while 20,300 megawatt electricity being generated, however, on the flip side reports indicate a shortfall of 2000-3000 MW resulting in 4 to 8 hours of load-shed and leaving 51 million people with no electricity.

The shortage of power is not only effecting the households but also the economy as with a fair share of electricity, investors come in because the cost of production in such a country is minimal compared to where there is no electricity.

Currently in Pakistan, the transmission and distribution capacity is stalled at approximately 22,000MW. The maximum total demand coming from residential and industrial estates stands at nearly 25,000MW.

This leads to a deficit of about 3,000MW when the demand peaks and hence there is a need to shed the ‘extra’ load that results in load shedding. The additional 3,000MW required cannot be transmitted to where it is needed even though it can be generated.

In Pakistan, power is generated, transmitted and distributed by two power utilities, Water and Power Development Authority (Wapda), K-Electric and 42 Independent Power Producers (IPPs).

The capacity of all these units – primary transmission lines, secondary transmission lines, grid stations, distribution lines, distribution transformers – has failed to keep pace with the increase in generation capacity.

Now Prime Minister of Pakistan, Imran Khan in January this year, as part of a move to increase energy generation and fulfill this shortfall and Pakistan not being able to fight the crisis alone has signed a financing agreement with World Bank worth $100 million for a solar energy project in the southern part of the country.

Pakistan still has the potential to fulfill a good amount of energy requirements as if we look at the money that Pakistan is losing every year in different sectors due to the presence of illegal trade, it is much more than the annual amount need to complete this project. Pakistan loses roughly Rs 300 billion every year to smuggling of goods in 11 sectors (excluding counterfeit, tax evasion and under-declaration by local manufacturers).

The government can through better economic and enforcement controls collect those funds and invest them to improve the transmission lines. If we take the tobacco industry, of which the PM himself in his 100 day speech mentioned that the 98% of the tax collected from tobacco industry is paid by the two multinational companies that holds a market share of 60% while the rest 40% of the market share that belongs to illicit cigarette manufacturers contributes only 2% of tax revenue. This illicit trade is causing an annual loss of Rs 44 billion to the national exchequer.

Tobacco is just one sector and one can only imagine the real loss of illegal trade from the remaining 10 sectors. Now imagining if the loss from illicit tobacco sector is recovered, as per an estimate to the cost of Bin Qasim Power Station – II, 250,000 homes can be electrified by commissioning a 350 MW power plant. All the government needs is a better law enforcement to stop this illegal trade and fulfill the growing demand of electricity in the country on its own.

Copyright Business Recorder, 2019

Syed Shafiq Hussain, "Increasing demand of electricity," Business Recorder. 2019-06-14.
Keywords: Economics , Economic development , Power sector , Electricity crisis , Energy generation , Tax revenue , Pakistan , Imran Khan , WAPDA