Atif Mian, a Pakistani-American economist, has recently raised concerns about the state of Pakistan’s power sector, labeling it as a ‚zombie‘ industry that is draining the vitality of the country’s economy. In his latest post on X, Mian explains that ‚zombie firms‘ are essentially insolvent entities that are kept afloat through external subsidies. He points out that Pakistan’s power sector fits this description perfectly, as it continues to operate at a loss despite selling electricity at one of the highest prices in the world.
Mian highlights the fact that Pakistan is selling electricity at around 21 cents per kWh, including taxes, while the true market price should be closer to 8-9 cents per kWh, as seen in neighboring countries like India. This discrepancy in pricing is a result of the government’s efforts to prop up the sector, even though it is fundamentally bankrupt. Mian argues that this approach is unsustainable and is negatively impacting the overall economy.
The economist criticizes the government’s reluctance to acknowledge the sector’s bankruptcy, which has led to a broken system that has been deteriorating for the past three decades. This has resulted in citizens bearing the burden of high electricity costs, which in turn creates economic distortions across various industries. Mian emphasizes the importance of addressing this issue to prevent further damage to the economy.
Mian suggests that the power sector undergo a bankruptcy and restructuring process to realign the value of its assets with market reality. He points out the challenge posed by sovereign guarantees given to private companies in the past, which have hindered effective restructuring efforts. Mian proposes a solution based on basic economic principles, advocating for pricing electricity at a fair market rate to avoid economic distortions.
In order to address the issue, Mian recommends separating the power sector into viable assets that can operate sustainably at a fair price, and non-viable assets that require legal restructuring, privatization, or government intervention to manage losses. By taking these steps, Mian believes that Pakistan can begin to address the systemic issues plaguing its power sector and pave the way for a more sustainable and efficient energy system.
Overall, Atif Mian’s warning about the state of Pakistan’s power sector serves as a wake-up call for policymakers and stakeholders to take action to address the underlying issues and ensure the long-term viability of the country’s economy. His insights and recommendations provide a roadmap for reforming the power sector and creating a more stable and prosperous future for Pakistan.
