Electricity Issues and Their Effects on Small and Medium-Sized Enterprises in Pakistan

Abstract

The primary objectives of this study are to draw the government's attention to the critical issues concerning the escalating electricity crises and rising electricity prices in Pakistan, and to examine their ultimate impact on small and medium-sized enterprises. This research analyzes responses from a sample of 400 employees, randomly selected from various SMEs across the country. Using correlation and regression analysis, the study investigates the relationship between electricity issues and the operational behavior of SMEs. The findings reveal that increasing electricity prices and persistent electricity crises have a significant negative impact on the consumption behavior of SMEs. Among the two factors, the electricity crises are found to have a more profound effect on SMEs than the rising electricity prices. The frequent and severe electricity crises directly hinder the operations of SMEs, leading to substantial reductions in production, sales revenues, and employment levels. The study highlights that the operational disruptions caused by electricity shortages are more detrimental to SMEs compared to the financial strain from higher electricity costs. These crises not only impede daily business activities but also lead to long-term challenges in maintaining consistent production levels, fulfilling customer orders, and sustaining workforce employment. To mitigate these adverse effects, the study advocates for a policy change allowing SMEs to produce their own electricity. Granting legal permission for SMEs to generate their own power could be a viable solution to overcome the electricity shortfall and ensure uninterrupted business operations. By producing their own electricity, SMEs can reduce their dependency on the national grid, manage their energy consumption more efficiently, and avoid the operational disruptions caused by frequent power outages. Furthermore, this autonomy in energy production could enhance the resilience of SMEs, enabling them to maintain steady production rates, meet market demands, and safeguard employment. It would also potentially lead to cost savings in the long run, as SMEs could invest in renewable energy sources or more efficient energy systems tailored to their specific needs. The study underscores the critical need for government intervention to address the electricity crises and high electricity prices that are crippling the SME sector. Policymakers should consider implementing supportive measures that facilitate self-generation of electricity by SMEs, alongside other strategic initiatives aimed at stabilizing the electricity supply and controlling costs.