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What’s keeping Pakistan in the dark?

Fan Zhang's picture
 $18 billion in fiscal year 2015—that is 6.5 percent of the country’s economy.
Nearly  50 million Pakistanis still lack access to grid electricity. Power distortions cost Pakistan’s economy much more than previously estimated: $18 billion in fiscal year 2015—that is 6.5 percent of the country’s economy. Credit: Curt Carnemark/ World Bank

From 1990 to 2010, 91 million people In Pakistan received electricity for the first time.
 
And power outages across the country have gone down drastically over the past few years.
 
Clearly, Pakistan has achieved much progress in expanding its electricity access and production in recent decades.
 
However, nearly  50 million Pakistanis still lack access to grid electricity and the country ranks 115th among 137 economies for reliable power.
 
After peaking in 2006, per capita electricity consumption failed to grow for almost a decade, remaining only one-fifth the average for other middle-income countries in 2014.
 
To boost sustainable energy supply, Pakistan’s power sector needs urgent investments and reforms to target inefficiencies in the entire electricity supply chain.
 
Fittingly, my new report In the Dark analyzes what lies behind these inefficiencies and suggests relevant actions to improve the operation of power plants, cut down on waste and costs, and increase electricity supply in a cost-effective manner.
 
The study sheds new light on the overall societal costs — not merely the fiscal costs as in previous research — of subsidies, blackouts and other distortions in the power sector.
 
To that end, my team and I surveyed Pakistan's entire supply chain from upstream fuel supply to electricity generation, transmission and distribution, and eventually, down to consumers.
 
Put simply, the numbers we found are dire.
 
Power distortions cost Pakistan’s economy much more than previously estimated: $18 billion in fiscal year 2015—that is 6.5 percent of the country’s economy.
 
Problems begin upstream, where gas underpricing encourages waste and reduces incentives for gas production and exploration.
 
And with no recent significant gas discoveries, higher gas usage has widened the gap between growing demand and low domestic supply.
 
On top of that, the volume of gas lost before reaching consumers reached 14.3 percent in fiscal year 2015. By comparison, this number is about 1 to 2 percent in advanced economies.
 
Public power plants use 20 percent more gas per unit of electricity produced than private producers.
 
Poor transmission contributed to 29 percent of the electricity shortfall in fiscal year 2015, while weak infrastructure, faulty metering and theft cause the loss of almost a fifth of generated electricity.
 
Electricity underpricing and failure to collect electricity bills have triggered a vicious “circular debt” problem, leading to power outages.
 
A lack of grid electricity also leads to greater use of kerosene lamps that cause indoor air pollution and its associated respiratory infections and tuberculosis risks.
 
Lack of access to reliable electricity also adversely impact children’s study time at night, women’s labor force participation, and gender equality.
 
Connecting all of Pakistan’s population to the grid and increasing the supply of electricity to 24 hours a day would increase total household income by at least $4.5 billion a year and avoid $8.4 billion in business losses.

Out of Power? Political Capture of the Indian Electricity Sector -- Guest post by Meera Mahadevan

Development Impact Guest Blogger's picture

This is the eighteenth in this year's series of posts by PhD students on the job market.

In 2012, 700 million people in India suddenly found themselves without power for over 10 hours. At the time of the incident, political parties blamed each other for mismanagement and failing infrastructure. Such incidents reflect the extensive dysfunction in the sector, with technical problems and billing leakages that are among the worst in the world, amounting to 20% of electricity generated. The poor quality of electricity supply imposes major costs on the Indian economy; electricity shortages, for example, reduce manufacturing plant revenues by 5-10%. Why do these problems persist despite exponentially growing power generation? My job market paper shows that political corruption is one of the root causes behind unreliable electricity supply.

What is the link between political corruption and poor electricity supply? In democracies, incumbent politicians may consolidate power by favoring their voters with better access or lower prices. In India’s electricity sector, where politicians do not have direct control over electricity pricing, they may resort to illicit means in order to do this. Lower prices may actually benefit targeted consumers.  But such patronage is costly: it hurts the revenues of electricity providers, inhibiting their ability to invest in infrastructure, and lowering electricity reliability for all consumers. While subsidies and increased access benefit consumers in targeted constituencies, the resulting underinvestment by providers may lead to unreliable supply.

Estimating the often-ambiguous welfare implications of corruption is, therefore, a challenge. Especially since detecting corruption is hard: corruption is frequently concealed, complicating the task of making causal inferences and identifying mechanisms of corruption. In this research, I develop novel methods to address these challenges, and find that political corruption in the electricity sector leads to large revenue losses for electricity providers, worsening their ability to reliably provide electricity.

Energy prices fell 15 percent in November–Pink Sheet

John Baffes's picture
Energy commodity prices plunged more than 15 percent in November, led by oil (-19 percent) and coal (-7 percent), the World Bank’s Pink Sheet reported.

Non-energy prices declined by 1 percent, due to losses in agriculture and metals.

Agricultural prices fell 1 percent—a 3 percent decline in oils and meals was offset by a marginal gain in beverages.

Fertilizer prices gained nearly 6 percent, led by a 13 percent increase in urea.

Rebound in metal prices? All eyes on China and trade

Wee Chian Koh's picture

This blog is the eighth in a series of ten blogs on commodity market developments, elaborating on themes discussed in the latest edition of the World Bank’s Commodity Markets Outlook. Earlier blogs are here.
 
The World Bank’s Metals and Minerals Price Index is forecast to remain broadly unchanged in 2019, following a projected 5 percent increase in 2018. However, volatility is anticipated to remain elevated due to China’s environmental policies, tariff negotiations between the United States and China, and Chinese policy responses aimed at stimulating the economy and cushioning the impact of trade tensions.

Time to ask the tough questions about transport and climate

Nancy Vandycke's picture
Photo: Bernard Spragg/Flickr
Last month, the Intergovernmental Panel on Climate Change drew global attention by providing fresh and overwhelming evidence about the urgency of the climate situation. According to the agency’s latest report, global temperatures will reach 1.5 degrees Celsius above pre-industrial levels within the next 12 years—unless we act now. 
 
Transport bears a huge responsibility in the current situation: the sector contributes to nearly a quarter of global energy-related greenhouse gas emissions, and 18% of all manmade emissions in the global economy.  Under a business-as-usual scenario, this figure will continue rising to reach 1/3 of all emissions by 2040.
 
This means cutting emissions from transport will be central to solving the climate equation. To kickstart this process, the Sustainable Mobility for All initiative (Sum4All) just released a preliminary Global roadmap of action towards sustainable mobility that lays out concrete policy measures for a healthier transport future. Our coalition of 55 leading public and private organizations looks at all dimensions of sustainability: safety, efficiency, equitable access, and, of course, environmental impact.
 
As global leaders head to Poland for the COP24 Climate Conference, now is a good time to identify the most effective solutions for lowering the carbon footprint of transport. In that spirit, we encourage all interested parties to provide input and feedback on SuM4All’s Roadmap of Action: Which policy interventions do you think should be prioritized? Are there any critical measures that are missing from the proposal?  How can the private sector be part of the solution?

Fertilizer prices to rise in 2019 on supportive fundamentals

John Baffes's picture

This blog is the seventh in a series of ten blogs on commodity market developments, elaborating on themes discussed in the latest edition of the World Bank’s Commodity Markets Outlook. Earlier blogs are here.
 
The World Bank’s Fertilizer Price Index is expected to rise 2 percent in 2019, following a projected increase of 9 percent in 2018. The index rose 8 percent in the third quarter of 2018 (q/q) on high energy costs and tight supplies and was more than 18 percent higher than 2017Q3.

Digging the cold gold for the most vulnerable

Jürgen Fischer's picture
Photo Credit: Zhu Difeng / Shutterstock


There is a myth that cooling technology is just for those who live in hot and humid climates. Let me break this illusion. Cooling is needed all around the world. How else do you think we would keep the food fresh and safe to eat? Or create and preserve medicines for people to shield their lives? Even the Internet relies on cooling technology to keep servers in massive data centers from overheating.

Raw materials outlook: Cotton, rubber prices to stabilize in 2019

John Baffes's picture
This blog is the sixth in a series of ten blogs on commodity market developments, elaborating on themes discussed in the latest edition of the World Bank’s Commodity Markets Outlook. Earlier blogs are here.
 

Beverage prices weak on good crops and currency movements

John Baffes's picture

This blog is the fifth in a series of ten blogs on commodity market developments, elaborating on themes discussed in the latest edition of the World Bank’s Commodity Markets Outlook. Earlier blogs are here.
 
The World Bank’s Beverage Price Index is projected to stabilize in 2019 after a more than 5 percent decline in 2018 from the previous year. Beverage prices declined almost 9 percent in the third quarter (q/q), with roughly similar losses across all three components (coffee, cocoa, and tea), reflecting more supplies than expected in all markets.
 
Beverage price index

 

Food prices to edge up in 2019 but energy, trade, and foreign exchange could unsettle outlook

John Baffes's picture

This blog is the fourth in a series of ten blogs on commodity market developments, elaborating on themes discussed in the latest edition of the World Bank’s Commodity Markets Outlook. Earlier blogs are here.
 
Grain prices are projected to edge up 1 percent in 2019 after an estimated 10 percent rise in 2018, and oils and meals prices are expected to increase more than 2 percent next year, reversing a 2 percent decline this year. However, these price forecasts are subjected to risks that include energy, trade, and foreign exchange movements.
 
After gaining some momentum in early 2018, most food commodity prices weakened significantly in the third quarter. The World Bank’s Grain Price Index declined nearly 6 percent in Q3 but was 8 percent higher than a year ago. The Oils and Meals Price Index fell almost 11 percent in Q3, and stands 3 percent lower than a year ago.
 


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