Islamabad, Dr. Shahid Rasheed Butt, former President of the Islamabad Chamber of Commerce and Industry (ICCI), has highlighted the high cost of electricity as a significant barrier to Pakistan's ability to export goods. In a statement issued on Thursday, he pointed out that per capita electricity usage in the country has been on a decline for the past five years, attributing this trend to rising capacity charges amid stagnant demand. Dr. Butt emphasized that addressing the power sector's deficit should not be reliant on frequent tariff hikes but rather on implementing taxes targeting the elite.
According to Islamabad Chamber of Commerce and Industry, Dr. Butt's remarks shed light on the pressing issue of electricity affordability and its impact on both the general population and the production sector. He argued that without a reduction in electricity costs, achieving a substantial increase in production and exports is an untenable goal. Dr. Butt cited an estimate suggesting that a ten percent hike in electricity prices leads to a three percent drop in usage, reflecting the elasticity of demand for power and its implications for industrial and household consumption.
The statement further elaborated on the challenges posed by the high cost of electricity, including the shift of many industries and individuals towards alternative energy sources like gas and solar power, consequently exacerbating the burden of capacity payments on the public. Dr. Butt cautioned that unless there is at least a 15% increase in electricity demand, capacity payments could surge by 50%.
Highlighting the financial strain on the power sector, which results in escalating electricity prices, Dr. Butt criticized the lack of strategic focus on reducing electricity costs through alternative fiscal measures, such as taxing the wealthy. He also pointed to the adverse effects of the rupee's depreciation on the sector, suggesting that payments to private-sector power plants, which are currently made in dollars, should be linked to the local currency to mitigate the impact.
Dr. Butt proposed several solutions to alleviate the power sector's woes, including reallocating gas to more efficient power plants, incentivizing industries to reconnect to the grid, and allowing Independent Power Producers (IPPs) to enter into direct sales agreements with private customers. He warned that without such interventions, more industries and commercial entities might opt to go off-grid, further increasing the per-unit capacity charges and compounding the sector's challenges.