Institutional determinants of power sector reform in Pakistan

Abstract

The electricity supply sector in Pakistan has performed poorly in recent years. Reforms were introduced in mid 1990s to improve the sector, but progressed slowly with no significant impacts on pre-reform performance. This study uses new institutional economics as a theoretical basis to elucidate reasons for the failure of power sector reforms in Pakistan to make improvements. Interviews with 23 experts using Q-methodology generated 215 statements that were used as the Q concourse. Of these, 51 statements were selected for the Q sample and ranked by 34 respondents depending on their importance. Analysis revealed four important discourses on the determinants of power sector reform failure in Pakistan. These included weak governance structure, country and sectoral endowments, inefficient regulator and unspecified political institutions or unfriendly political contexts. The study recommends establishment of institutions that support a market based power supply sector and improvements to the contractual arrangements between stakeholders to reduce opportunistic behaviour.

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“…It is for the safety of companies to take mutual consensus of civil-military authorities otherwise it may lead to a collision as happened in the case of the Enron (Dabhol-India) power plant. The same ideas are also presented in the studies of (Rafiq et al 2020;Ullah et al 2017;Williamson 2000) but, in previous studies, the contextual analysis of power sector was lacking.…”

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“…This outcome not only is aligned with the proposed hypothesis of EM but also supports the evidence of EC prevailed in the country. This result has been the concern of many researchers (Hajiran et al 2008;Asif, 2009;Khalil & Zaidi, 2014), where the role of EM as the factor of EC has been discussed as an ad-hoc adjustment in the short term policy measure to settle the energy supply-demand dynamics, which eventually has turnout a catastrophic EC (Kugalman, 2013;Gul & Chudhry, 2015;Ullah, Arentsen, & Lovett, 2016).…”

“…Such as countries with economic prosperity issues should not opt an energy mix, which would lead wealth flows out of the country in the form of energy import bills. The harmony of policies to keep sustainability and affordability of EM requires political will and strong energy institutions (Ullah et al, 2016). Moreover, Gul and Chudhary (2015) also believed that expensive energy mix and energy losses are the biggest contributors to the energy crisis.…”

“…Consequently, the performance of energy sector despite energy reforms in the early 1990s could not bring any significant change and improvement, hence, been contributing in the misery of energy sector then (Ullah, Arentsen, & Lovett, 2016;Mirjat et al, 2017). This unjustified, inefficient energy mix when aligned with the transmission and dispatch losses, insufficient tariff structures, ineffective subsidies, and circular debt under make governance structure and weak institutions became the tumour of energy crisis (Malik, 2012;Munir & Khalid, 2012;Kessides, 2013;Kugelman, 2013).…”

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“…Technical causes occur during the transfer of electricity from one point to another due to power dissipation in the process. Non-technical causes include managerial and institutional causes such as the governance structure, the system of redistribution of subsidies, or the political interference in public electricity services [2,[4][5][6].…”