The Cost of Unserved Energy: Evidence from Selected Industrial Cities of Pakistan

This study is an attempt to explore the cost of unserved energy due to power outages in Pakistan that started in 2007. The study is based on a survey conducted for four major industrial cities of Punjab—Gujrat, Faisalabad, Gujranwala, and Sialkot. In addition to quantification of output losses, the effect on employment, cost of production, and delay in supply orders are also examined. The output loss is quantified using two-dimensional analyses, controlling for variations in the duration of outages and in the shift hours. The survey data reveal that employment has not suffered any significant drop due to alternative energy arrangements. These arrangements, nevertheless, have increased the production cost of the firms. Delays in the delivery of supply orders are also due to energy shortage. The study reports that the total industrial output loss varies between 12 percent and 37 percent, with Punjab as the major affected province. In the two dimensional analysis resulting in nine scenarios for each province, the ranges of losses in billion Rs are 132-400, 109-331, 17-54 and 11-34 for Punjab, Sindh, Khyber Pakhtunkhwa and Balochistan respectively. The overall industrial sector loss in volume ranges between 269-819 billion rupees. In the overall analysis, food and beverages, textile, and chemical product industries are respectively the top three industries on the scale of losses. However, in terms of percentages, the pottery and ceramic industry is the industry that suffered the most.