The crisis
in Pakistan’s energy sector is no longer confined to worsening the country’s
grim industrial crisis and deepening its social chaos. It has now come to a
point where it has begun to pose challenges to the country’s national security.
The daily load-shedding of six to eight hours in the urban areas and 12-18
hours in the rural areas has led to significant vulnerabilities that are now
rapidly leading to political instability. At a time when the country is
fighting a war against terrorism, and with the energy shortage worsening
unemployment in the failing industrial sector, riots triggered by chronic power
cuts have created the perfect environment for widespread violence and civil
disturbance.
Pakistan, which had a surplus of electricity in 2002, is now short of more than
5,500 MW. Its present peak demand is 18,100 MW. The annual rate of growth in
electricity consumption was 3 percent in 2003. It rose to 10 percent in 2008
because of economic growth and the continuous unplanned rural electrification under
local political pressures. The government’s failure to anticipate this
galloping growth rate is one of the other major causes of Pakistan’s energy
crisis.
But the fundamental cause is Pakistan’s increasing dependence on fossil fuels
for energy generation. The country has the capacity to generate almost 17,500
MW of electricity but the system is not working to full capacity because of the
spike in the cost of generation. The severe shortage of gas is coupled with the
skyrocketing cost of imported furnace oil, to which thermal power plants have
been forced to switch to meet the gas shortage. Pakistan, with its crippled
economy already crippled, is in addition overburdened with huge bills for the
import of furnace oil.
Pakistan’s daily gas requirement is 6.5 billion cubic feet (BCF), against its
current supply of 4 BCF, a shortfall of 2.5 BCF. The major consumer of gas is
the power sector, which consumes nearly 40 percent of the total production of
gas. Among other things, this is causing the depletion of our limited gas
reserves.
Because of these reasons, the cost of provision of electricity to consumers
could not be fully recovered, while at the same time the tariff for consumers
remained unchanged from 2002 to 2007. In early 2007 the government increased
the electricity tariff the increase but could not pass the whole cost of
production onto the consumers. The gap in the cost of electricity generation
and government-notified tariff swelled to Rs3.39 per unit in 2010.
The gas crisis and the shift towards oil use for generation of power, coupled
with the inability of the power distributions companies to pass on the cost of
electricity to consumers, have turned the power sector hostage to circular
debt. The dependency on fossil fuel pushed the country’s power sector into a
grave dilemma which it has no means of resolving at the moment: if it power
plants run on oil, they cause circular debt; if they do not, the only
alternative is large-scale load-shedding.
The energy crisis had already been piling up when the government led by the
Pakistan People’s Party assumed power in March 2008. The sycophant of Asif Ali
Zardari who was appointed adviser to the ministry of water and power, had
persuaded him and Prime Minister Yousuf Raza Gilani that rental power plants
(RPPs) were a panacea for the energy crisis. In line with a party decision, the
federal cabinet approved installation of 14 rental power plants for the
generation of 2,700 MW. The rental power plants, which are only contributing 68
megawatts to the national grid, turned into a mega corruption scandal and the
country’s energy crisis only deepened. The country has to pay a very high cost,
but the gas shortage has sent the cost of electricity generation skyrocketing.
This was the Himalayan blunder committed by Zardari’s government.
Hydroelectricity, the cheapest and most environment-friendly source of energy,
was not considered, let alone its receiving the priority it deserved in
government planning. Hydroelectricity generation were the dominant of power
production, the government could have achieved the objective of consumer-end
tariffs at affordable levels while also meeting the true cost of electricity
production.
Whenever the question about hydroelectricity is raised, the ministry of water
and power has always come up with the response that hydropower projects take a
long time to build and need huge capital investment. But this is a rather weak
argument in view of modern hydropower project management.
In our own neighbourhood, Indian policymakers are working towards adding 50,000
MW of clean and renewable hydropower to their energy mix and have resultantly
set some significant records in this regard. Many public-sector hydropower
projects – for instance, the 520 MW Omkareshwar project on the Narmada River –
has been completed in four years. Small hydropower projects are taking 20 to 22
months for completion.
However, on top of the list of excellent hydropower project management is the
86 MW Malana hydroelectric power project in Himachal Pradesh. It is unique
because it was constructed within 30 months against its five-year schedule, and
at almost 50 per cent the original cost in the approved budget – and that too
on difficult mountainous terrain at high altitude.
In Pakistan, the ministry of water and power deliberated with stakeholders for
two-and-a-half years and finally brought out a power generation policy in 2002,
under which run-of-rivers hydropower projects were planned for the addition of
4,325 MW of electricity, and funds and the schedules were determined
accordingly. However, only two projects were completed in nine years. All these
projects were delayed, and the delay resulted in the serious energy crisis in
the country. Had the projects been implemented according to plan, Pakistan
would have had 4,325 MW of cheap hydroelectricity.
The abnormal and deliberate delay in hydropower projects and wastage of heavy
foreign exchange on RPPs is not the only crime of the ministry of water and
power. In 2008, when the government was finding it difficult to lure foreign
investment to overcome increasing energy shortfalls, an entrepreneur requested
the ministry for permission to start the 600-MW Mahl hydropower plant which was
advertised by the Board of Investment (BOI) for private-sector investment. The
private entrepreneur arranged 800 million dollars for the generation and sale
of electricity at just Rs4 per unit. This was sabotaged by the adviser to the
ministry of water and power.
As a last resort, the investor published an appeal to the President and Prime
Minister on March 27, 2010, requesting them to intervene to enable the
development of the Mahl hydropower project. He has never had a reply from
either. However, in April 2011, the adviser to the ministry of water and power
sent another demand to the Friends of Pakistan seeking funds of $37 billion for
hydropower projects, including Mahl. Development of hydropower is the only
solution to the Pakistani energy crisis. The government’s failure to address
the energy crisis shows that some elements in the government who have their own
plans.
If Pakistan is to prosper, the country urgently needs honest, dedicated and
sincere leaders, ministers and advisers who can help create an enabling
competitive environment for the private sector to participate in investment in
the field of power generation without fear.
Email: ahabasi@gmail.com
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