“Efficiency of Power Generation Companies in Pakistan: Application of Non-Parametric Approach”

Abstract

Power generation has a central role in the economic growth of every country specifically, in developing countries like Pakistan where, there is scarcity of electricity. Efficient and cheap generation of electricity can assure continuous country’s economic growth and development. Therefore, the objective of current study is to investigate the efficiency of Power Generation (PGs) firms in Pakistan for the tenure of 2014 to 2018. These PG firms are also known as Independent Power Producers (IPPs) in the country. This study has applied Data Envelopment Analysis (DEA) and the value added approach is followed over the study for selection of the input and output variables. Sales and power generation is selected as output variables while the selected input variables are gross capacity, fuel cost and labor. The findings of study states on average level the Technical Efficiency (TE) of these PG firm is founded at the level of 72% while Pure Technical Efficiency (PTE) is 86% and Scale Efficiency (SE) is 85%, respectively. Moreover, it was also found that there is an increasing trend in the efficiency of these PGs firms for the tenure of five years. Furthermore, the Tobit regression results suggest
as that age is negatively pertained with efficiency whereas, liquidity is found as positively pertained with the efficiency of PGs. Size is found as positively pertained with TE and SE whereas, negatively pertained with PTE in contrast, debt is found positively pertained with PTE and negatively pertained with SE.