Inefficiencies in Public Electricity Provision and Impacts on Firms in Karachi’s Manufacturing Sector

Nausheen H. Anwar


The private costs of electricity supply failures are
substantial and inimical to industrial productivity. Using results from
a small sample survey of manufacturing firms in Karachi, the study
documented the causes, extent and incidence of the failures, identified
and classified the firms’ private responses, and estimated the capital
share of internally produced power and the associated costs. The results
are reported here to engender discussion for developing a policy model
of infrastructure provision suited to a developing country like
Pakistan. The most encouraging options are those that allow for
cooperative provision amongst firms with concurrent reforms in the
regulatory and institutional environments. An optimal policy will allow
inter-firm trading of electricity making the power market competitive.
Those firms that already have extensive private generating capacity due
to weak public supply will realise scale economies by selling electric
power to lower the costs of private provision. Competition in
electricity supply implies that industrial users will find attractive
substitutes in the private sector. This will lead to a reduction in the
demand on public service, already limited in quantity and quality in key
urban-industrial locations like Karachi.

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