Surmounting the Energy Challenge

History will remember May 11, 2013 as a defining day in Pakistan’s history as on this very day Pakistanis came out in large numbers to vote despite threats from the terror outfits. Their vigour on the polling day delineated the fact that they had great faith in democracy.

The smooth transition of power from one elected government to another elected one is indeed unprecedented in Pakistan’s history. This heralds a new beginning for a country which has seen too many martial laws and intermittent disruption of democratic orders.

In Elections 2013, PML-N emerged as the largest party in centre while the electorate gave a split mandate to different political parties ‘PML-N in Punjab, PPP in Sindh, PTI in KPK but no single party could get majority in Balochistan. In a way, this is a healthy development as it will keep all the provincial governments under constant check and will foster a sense of competition to deliver and outshine others in terms of performance.

The new governments have been installed at the centre and in provinces. Their honeymoon period is over and they have started functioning. So, it is much relevant to make an assessment of the challenges that the federal government is facing at various fronts.

The challenges before the new PML-N government emanate from both internal and external factors. At domestic front, the government has to deal with energy crisis that, according to Economy Survey of Pakistan, is responsible for causing 2% loss to GDP. Other issues such as flagging economy, law and order, Balochistan issue, civil-military relations and strengthening of state institutions will dominate the government’s agenda at the domestic level. Externally, the government will have to protect the country’s interests, vis-à-vis US drawdown from Afghanistan, relations with its neighbours such as India, Iran and China and last but not least, the issue of drone attacks that has been and is violating our sovereignty and territorial integrity in contravention of the UN Charter and the international laws.

At top of the list of formidable challenges is the chronic energy crisis. While all other challenges are equally daunting and closely intertwined, it is this very crisis that will be a yardstick to measure the performance of Nawaz Sharif’s government. It is quite pertinent to say that the electorate largely voted PML-N into power due to its claim to rid the country of scourge of load-shedding in a short span of time.

The country’s power sector needs fundamental reforms to resuscitate it from the abyss into which it has fallen. At the heart of multiple ailments that underline the functioning of power sector is the circular debt of about $5 billion. Other issues include massive line losses due to outdated infrastructure, management issues, power theft, hydro-thermal mix and lack of investment in this sector. Resultantly, the previous government had to give a subsidy of Rs. 360 billion to continue the supply of furnace oil and gas to thermal stations for electricity generation. The country has installed generation capacity of 20,000MW, it is the energy mix, which needs attention to produce low-cost energy. At present, the country’s energy mix stands at 68:32 (thermal: hydel). The share of nuclear power production is too negligible to mention. Power generated from thermal stations is so costly and dependent on fluctuations in the oil market that the government has to subsidise it thereby causing a huge loss to the national exchequer.

WAPDA is currently working on the construction of various hydropower projects that, on completion, will add nearly 21,000MW of power to the national grid and will store nearly 8.1 million acre feet (MAF) as well. It will take a few years before hydel power becomes available to ease the burden of load-shedding according to the Planning Commission. Before some breathing space becomes available, the government will have to arrange investment for thermal power stations to ensure uninterrupted supply of gas and oil. The Finance Minister has pledged to retire the circular debt within 60 days which is good news as it will help improve power supply.

 At domestic front, the government has to deal with energy crisis that, according to Economy Survey of Pakistan, is responsible for causing 2% loss to GDP.
 Pakistan possesses the second largest coal reserves in the world. If utilized prudently, these reserves can meet Pakistan’s energy needs for many years to come. In this regard, work on four blocks, including a 100-MW pilot project of coal gasification, is going under the supervision of Dr Samar Mubarakmand. Likewise, wind and solar are other sources which need to be exploited. However, these projects, though of huge importance to energy-starved Pakistan, require huge foreign investment and technical expertise. Iran-Pakistan gas pipeline project is of strategic value as well. The government will have to brave the pressure from the US and other quarters if it goes ahead with this project. So far the vibes from the official quarters are quite encouraging as the new government has indicated to proceed at the project.
The country’s power sector cannot be reformed unless there is transparency and accountability in its operations, which again hinges on appointment of independent and honest CEOs. Under the Companies Ordinance 1984, the distribution companies are independent corporate entities which are managed by their respective boards. If 40% of its members, under the Public Sector (Corporate Governance) Rules 2013, are appointed purely on merit and competence, there is a hope that they will be able to turn things around. These boards must be allowed to exercise their powers to the fullest and carry out their fiduciary duties with a sense of objective judgement and independence.

The most daunting challenge before the new government, at the moment, is to arrange finances to generate power to meet the growing needs and kick-start the stalled engine of economy. Available options include IMF, Asian Development Bank and the World Bank, which is a route trodden so many times by past governments. The second option is to ask the friendly countries such as Saudi Arabia and China to extend help. The government has done well to adopt austerity and cut down non-development expenditures. This indeed is a praiseworthy initiative. Equally significant is the formation of a high-powered energy committee to oversee the energy sector and suggest measures to deal with the ongoing crisis.

Hopefully, these steps would help in resolving the energy crisis in a short period and the country will be strengthened economically.

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