The recent surge in electricity tariffs, with an increase of Rs.4.96 per unit, bringing the total cost to Rs.29.78, is a significant burden on the public. Balancing the need for economic growth with high operational costs becomes increasingly challenging in such circumstances. Structural reforms are necessary to rectify the failures of past governments and bridge the fiscal gap through alternative solutions.
Distribution companies (Discos), plagued by poor governance and mismanagement, collectively suffered a loss of approximately Rs.170 billion during this period. This mounting circular debt poses a serious threat to the economy, and much-needed power sector reforms are being pushed further down the road.
This data underscores the urgent need for competition in the power sector. The current exclusive rights enjoyed by the discos have hindered progress and perpetuated inefficiencies. By opening up the market to new players, the power industry can attract local and foreign investment, improve distribution networks, introduce new technologies, and enhance overall service quality.
New players could operate in areas where distribution companies lack infrastructure. However, there are concerns that these companies may attempt to block the implementation of a competitive market to maintain their exclusivity and supposedly provide better consumer services. The Nepra Chairman, Mr. Farooqi, emphasises that the discos can no longer delay this process.
Market liberalisation is crucial for the power industry’s sustainability, allowing consumers to potentially access cheaper rates, according to K-Electric’s (KE) CEO Monis Alvi. The removal of exclusive distribution rights will compel the discos to invest in infrastructure, reduce losses, and improve service delivery to remain competitive. KE has proposed a substantial investment plan, anticipating growth in their customer base and a projected increase in electricity demand.
Competition is the way forward to protect consumer interests and revitalise the economy. The Discos must understand this and prepare for the challenges and opportunities that competition will bring. It is regrettable that the Discos have failed to protect consumer interests, causing significant damage. Change is necessary, and the power sector must embrace the transition towards a competitive and consumer-centric market.