National Electricity Policy 2021 - The New Pivot of Pakistan's Power Sector and the Circular Debt

Abstract

The cost of electricity has increased in Pakistan over the years but the last two decades have seen some excessive increases in the per unit cost of electricity. These increases have happened despite visible efforts by the successive governments to subsidize the costs of electricity and lessen the burden for the common man in Pakistan. Various factors have been attributed to the increasing cost of electricity like lack of transparency in the operations of the power sector, poor energy mix, poor governance, lack of competition in the sector vis a vise competitive market operations, poor performance of the public sector entities like DISCOs (Distribution Companies) and GENCOs (Generation Companies), NTDC (National Transmission & Dispatch Company) etc. Another factor which has really been discussed extensively in Pakistan’s power sector in the last more than one decade is the circular debt which, incidentally, has also been attributed as one of the major factor contributing towards the increasing cost of electricity in Pakistan. Such increases in the per unit cost of electricity have been primarily based on the assumption that increase in electricity tariff will help to arrest the upward increase of circular debt in the power sector. And while this fallacy has been proven wrong, the increasing cost of electricity has negatively impacted the economic growth of the country besides bringing more hardships in the life of the common man in Pakistan. All local as well as international institutions like World Bank, Asian Development Bank (ADB), International Monetary Fund (IMF), USAID (United States Agency for International Development) etc. agree that circular debt has become a monster for Pakistan’s power sector in particular and the economy in general and needs to be eliminated for a viable and sustainable power sector of the country. The National Electricity Policy 2021 which has been approved by the government of Pakistan is the first of its kind vis a vise a policy document which has addressed the issues of Pakistan’s power sector holistically. Interestingly, this policy document uses the word “monster” for the circular debt which is another indication of the seriousness of the matter. This paper is an attempt in this very direction.