Renowned Pakistani-American economist Atif Mian has issued a stark warning about the dire state of Pakistan's power sector, labeling it a "zombie" industry that is slowly but surely draining the vitality of the country’s economy. Mian, who is known for his sharp economic insights, explains that a "zombie" industry is effectively bankrupt—it cannot generate enough revenue to cover its operating costs—but is kept alive by government subsidies and external support.
In his recent analysis, Mian pointed out that Pakistan is currently selling electricity at one of the highest rates in the world, approximately 21 cents per kilowatt-hour (kWh), including taxes. Despite these steep prices, the power sector as a whole continues to operate at a loss. This means that even though consumers are paying a lot for electricity, the money isn't sufficient to cover the costs of running the sector. As a result, the government has to step in to cover the shortfall, which puts a heavy burden on the country's already strained financial resources.
Mian compares Pakistan’s electricity prices to those of neighboring India, where the true market cost is much lower—around 8-9 cents per kWh. He argues that Pakistan's inflated electricity prices are not just a symptom of inefficiency, but a sign of a deeper problem: the government's refusal to acknowledge the financial insolvency of the power sector. Instead of addressing the root causes of the sector's troubles, the government continues to pump money into keeping it afloat, like a lifeline for a failing industry that is no longer viable.
The consequences of this approach are severe and widespread. Because electricity is a fundamental input for nearly every industry, the high cost of power ripples through the entire economy. Businesses face higher production costs, which they often pass on to consumers, leading to inflation and reduced economic competitiveness. Moreover, ordinary citizens bear the brunt of these costs in their monthly utility bills, which strain household budgets and reduce overall consumer spending.
Atif Mian advocates for a complete overhaul of Pakistan's power sector. He suggests that the government should confront the reality of the sector's insolvency and begin a process of restructuring. This could involve separating the viable parts of the power sector—those that can operate efficiently at a fair market price—from the non-viable parts that require legal restructuring, privatization, or even closure. By doing this, the government can help stabilize the power sector, reduce electricity costs, and alleviate the financial burden on the broader economy.
Mian emphasizes the importance of not falling into the "sunk cost fallacy," where past investments and decisions are used as a justification to continue supporting failing enterprises. Instead, he argues that Pakistan must focus on pricing electricity at a level that reflects its true market value, which would prevent further economic distortions and help the country move toward a more sustainable energy future.
In summary, Atif Mian’s message is clear: Pakistan’s power sector, in its current form, is unsustainable and is dragging down the entire economy. Urgent reforms are needed to break free from this "zombie" state, reduce electricity prices, and create a more resilient economic foundation for the country. Without decisive action, the costs of maintaining the status quo will continue to mount, threatening Pakistan’s long-term economic stability and growth.
