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.
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 per cent 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 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 in March 2008 rental power plants (RPPs)
were a panacea for the energy crisis. 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 government. Hydroelectricity, the cheapest
and most environment-friendly source of energy, was not considered, let alone
it’s 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 Rental Power Plants (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.
The
author can be reached at ahabasi@gmail.com
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