Energy sector: a few winners, many losers

Year 2021 ended with deep scars on the energy sector but it was not without significant gains for a few

Independent power producers (IPPs) could be called the winners while the ordinary people and the government were the losers

The year was a blessing in disguise for some energy tycoons while consumers continued to suffer

Despite paying billions of rupees to the IPPs, electricity prices remained high, which mainly contributed to the increase in inflation and may prove to be a setback in government’s efforts to win the elections of 2023

Consumers paid a high cost of electricity as base tariff went up in addition to the rise in electricity prices on account of monthly fuel cost adjustments

The high energy tariffs and gas load-shedding in winter added to the miseries of people, though the Pakistan Tehreek-e-Insaf (PTI) government had come to power with the promise of providing relief to the common man

It cannot be denied that the entire world suffered due to high energy prices in the recent past, but the case of Pakistan was different

A sharp increase in dollar’s value against the Pakistani rupee was another factor that led to high prices of energy

Pakistan is a net importer of petroleum products and liquefied natural gas (LNG), and the surge of dollar impacts the cost of imports

Power tariff During 2021, the base electricity tariff went up around Rs4 to Rs16 per unit, which was reflected in the monthly bills of consumers

The government introduced new tariff slabs under the first phase to slash power sector subsidies

It was apparently part of the commitments made to the International Monetary Fund (IMF) under the $6 billion loan programme

Read Power company supports transition to open markets The government split the slab of 301-700 units into four categories - 301-400 units, 401-500 units, 501-600 units and 601-700 units

Under the new slabs, 13

9 million consumers of electricity were removed from the subsidy net

Earlier, 22 million consumers were receiving the subsidy

Apart from that, the consumers were compelled to pay the highest power tariff primarily in the face of soaring prices of fuel, which power producers used in electricity production

In a big shock to the consumers, the National Electric Power Regulatory Authority (Nepra) allowed power distribution companies to increase tariff by Rs4

7446 per unit as fuel cost adjustment, which resulted in collection of an additional Rs61 billion from consumers through December bills

Private power utility K-Electric also sought a tariff increase of Rs5

449 per unit on account of monthly fuel cost adjustments and quarterly tariff adjustment

It will prove to be another blow to the consumers of Karachi

Energy sector winners The Inquiry Committee on Power Sector pointed out that the IPPs had got over Rs1 trillion under different policies and recommended the recovery of the amount from them

Read more Gas subsidy for exporters to cost Rs41b But instead of recovering the amount, the government struck a deal and decided to pay Rs403 billion to 46 IPPs

In first instalment, the government paid Rs89 billion as it diverted the subsidy meant for power consumers

Circular debt The growing circular debt continued to haunt the entire energy chain in 2021

In its report for 2021, Nepra said that the circular debt added to the miseries in the power sector and hit the entire economy

As on June 30, 2021, the circular debt stood at Rs2

280 trillion as compared to Rs2

150 trillion on June 30, 2020

It was around Rs1

6 trillion when the PTI government came to power in August 2018

The oil and gas sector also suffered a lot as its debt crossed Rs1

6 trillion during the year, prompting the government to form a committee to resolve the issue, but to no avail

For the first time in history, the receivables of state-owned oil marketing giant Pakistan State Oil (PSO) reached Rs420 billion

A major contributor to the swelling receivables was LNG supplies in addition to power producers

Refining sector Oil refineries suffered the most during the year under review, which were forced to reduce operations as the IPPs were reluctant to take furnace oil supplies

Though the country faced shortage of LNG due to high prices in the global market, furnace oil was in surplus

Still the oil was not consumed

Also read Power tariff hike of Rs4

33 on cards As stocks of furnace oil swelled, Pakistan Refinery Limited (PRL) was shut down whereas other refineries ran partial operations

In the area of oil and gas exploration, the country did not witness any major discovery

Rather, the reliance on LNG grew but additional imports could not be made

Oil prices During the year under review, the prices of petroleum products soared to record highs, impacting all consumers from manufacturing units to ordinary people

In January 2021, the price of per litre of petrol was Rs106, high-speed diesel Rs110

24, kerosene oil Rs73

65 and light diesel oil Rs71


In November, the per-litre price of petrol reached Rs145

82, high-speed diesel Rs142

62, kerosene oil Rs116

53 and light diesel oil Rs114


Petrol and diesel are used in cars, big vehicles and agriculture sector

Kerosene oil is consumed in remote areas for cooking purposes where liquefied petroleum gas (LPG) is not available

Now, the government is going to take more steps to cut subsidies, which will make lives of people more difficult at a time of soaring inflation

Published in The Express Tribune, January 1st, 2022

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Date:02-Jan-2022 Reference:View Original Link