World Bank analysis shows need for reforms to cut costs and increase access to reliable electricity
ISLAMABAD, December 12, 2018 – in fiscal year 2015, according to a new World Bank report. Costs are far greater than previous estimates based on fiscal costs alone. .
In the Dark: How Much Do Power Sector Distortions Cost South Asia states that Pakistan has made great strides in expanding electricity access and capacity. 91 million more people are receiving electricity for the first time from 1990 to 2010.
Pakistan can boost economic growth and job creation by overcoming inefficiencies in its power sector,” says Illango Patchamuthu, World Bank Country Director for Pakistan. “Reforms that address these distortions can make better use of existing facilities. These need to focus on eliminating waste, promoting the shift towards cleaner energy and attracting private investments.”
A lack of grid electricity also impacts health, as it leads to greater use of kerosene lamps, causing indoor air pollution linked to respiratory infections and tuberculosis risks.
The report argues that reforms that focus solely on liberalizing energy prices would lead to an excessively high cost of electricity because of inefficiencies in the system, negatively impacting the poor and vulnerable. Reforms must therefore go beyond liberalizing energy prices to address several aspects of the power sector distortions, including prioritizing gas allocation for efficient power generation and adopting tariff mechanisms that encourage performance. Increased access to reliable power must be made a priority.
“Power sector reform should be a top priority, as few other reforms could yield economic gains of a similar magnitude so quickly, based on findings from this report,” says Fan Zhang, Senior Economist at the World Bank and author of the report. “If well designed, these reforms will directly benefit the poor by increasing access, improving reliability, and reducing cost and pollution.”