Reform the power: an institutional analysis of power sector reforms in Pakistan

Pakistan’s electricity sector is underperforming. It is inadequate, inefficient and unreliable. There is capacity shortage, high transmission and distribution (T&D) losses, inefficient pricing structures, costly and ineffective subsidies, circular debts and an inefficient resource mix in generation. These problems cause many and hours long system blackouts during day and night in Pakistan, thus inflicting impasse on daily life. These problems already existed before the 1990s, the period that Pakistan reformed its power sector with the intention to solve these problems. But the problems weren’t solved by the institutional reforms. Therefore, we assumed in this study that the continuation of the poor functioning of Pakistan’s power sector is caused by poor and incomplete design of the institutional reform of the power sector and by the pace of implementation of the reforms. So, inspired by New Institutional Economics, this dissertation analyses the institutional causes of the problems to find an answer to the question why the institutional reforms of the Pakistan power sector did not result in the expected improvement of the organization and functioning of electricity supply in Pakistan. The study utilizes a mixture of quantitative and qualitative methods to answer the overarching and its connected research questions. The analysis is based on a theoretical framework crafted from the work of Douglass North and Oliver Williamson (Nobel Laureates in Economics). The study holds that institutional barriers remained important in restraining the electricity reforms reducing the severity of the pre-reform problems of the power sector of Pakistan. This has contributed to the continuation of the pre-reform problems until recently. This requires re- designing the power sector reforms in coherence with the institutional endowments of the country.