Power to the people: Pakistan’s mismanagement of energy

Published: June 15, 2012

As temperatures rise this summer, so will the temper of the people of Pakistan. PHOTO: AFP

After years of mismanagement and neglect, Pakistan’s electricity supply is almost giving up the struggle. Just as the summer heat is taking its toll, daily blackouts are being imposed for up to 18 to 20 hours a day. This is creating major disruptions to commerce and industry, adding drastically to inflation and unemployment, causing further distress and unrest to the people of Pakistan.

The problem has been in the making for many years. The gap between supply and demand is now estimated at 40% because of an aged and inadequate infrastructure; a lack of foresight or planning and inadequate investment in the utility that failed to keep pace with growing needs.

Recently, the government has even failed to pay its own bills for electricity, defaulting on payments to nine independent power providers in a situation known as “circular debt”, which currently runs at $880 million. What has been collected from consumers is not enough to cover the cost of generation. The government’s energy sector debt is around $4.4 billion and the recent default could lead to a downgrade in the country’s credit rating.

Pakistan has relied far too long on expensive oil-based electricity and lagged behind in research and development for cleaner, cheaper sources such as solar and wind power. 81% of Pakistan’s electricity is generated from oil and gas which costs around $9.4 billion; this is biggest cost on Pakistan’s import bill.

The next administration will inherit a difficult and escalating problem and it is no longer viable to simply blame the preceding administration for neglecting a predictable crisis.

The good news is that solutions exist, both short and long term.

Better maintenance of existing power plants could provide higher capacity. Solar and wind power stations are cheaper to build than dams or nuclear energy plants. Pakistan’s 30 year coal reserves in Thar are often proposed as a solution, but the cost of extracting and processing it seems to outweigh its utility.

Pakistan has a huge potential to produce electric power from hydro-electric power plants. Hydro power has great promise and if all the projects with completed feasibility studies were to be implemented, Pakistan would have sufficient power for the next 20 to 25 years.

However, until the industry is functioning efficiently for existing consumers, it will be hard to raise capital for the enormous investments needed to take the industry forward. Considering the state it is in at the moment, one must wonder, who is going to pay for the new dams, necessary infrastructure and new nuclear energy plants?

Pakistan has been receiving energy aid from the US since the 1960′s; USAID funds built two huge hydroelectric projects, providing for 70% of the country’s needs at the time. Pakistan’s  share of USAID is able to fund energy this year, however, is only $112 million– not enough to solve the problem and too little to earn Pakistan’s gratitude.

While Pakistan is preventing the North Atlantic Treaty Organisation (NATO) convoys from travelling through the country to Afghanistan, it should not expect further generosity from the US Congress in the near future and should be looking to China and Russia instead.

But the notion that China will replace the US has been “overstated” by the Pakistani officials many times.

Chinese investment in Pakistan has actually been quite modest– more like $1.83 billion than the $25 million often quoted by politicians. China’s expressions of goodwill do not always successfully translate to actual funding as evidenced by its referral of Pakistan’s requests to the International Monetary Fund (IMF).

It was announced on May 30, 2012 that Pakistan will seek a further IMF loan to pay off outstanding IMF loans. But the IMF is not very pleased with the performance of the Pakistani government so far, as it has failed to reduce both unemployment and financial deficit of Rs1 trillion. The good news is that the World Bank has allocated an unprecedented $1.8 billion for Pakistan’s development projects this year, including  the proposed Dasu Dam on the Indus River in Kohistan to generate 1,500MW of electricity.

This will help but still may not be enough.

The unsustainable power subsidy of Rs 346 billion should be diverted towards rebuilding the electricity grid and investing in wind and solar generation as soon as possible, possibly with the provincial governments taking more responsibility for small scale alternative power generation.

The government must address the urgency of the shortfall in electrical energy supply brought about by insufficient generating capacity, an inadequate transmission system, an unforeseen increase in demand and a failure to plan for the future.

This will be a huge challenge for the next administration as the present leaders seem to have no immediate solutions while Prime Minister Gilani is too preoccupied with holding onto power and countering the calls for his resignation.

As temperatures rise this summer, so will the temper of the people of Pakistan, to whom the call of power to the people is taking on a whole new meaning.

Follow Azeem on Twitter @AzeemIbrahim


 

Azeem.Ibrahim

Azeem Ibrahim

An International Security and Geopolitics Lecturer at the University of Chicago. Fellow and Member of the Board of Directors at the Institute of Social Policy and Understanding and a former Research Scholar at the Kennedy School of Government at Harvard and World Fellow at Yale who Tweets @AzeemIbrahim

The views expressed by the writer and the reader comments do not necessarily reflect the views and policies of The Express Tribune.

  • Mushtaq K

    Excellent piece. Why can’t our government think like this young capable man?Recommend

  • Eying Propaganda

    Well written Recommend

  • Eying Propaganda

    @Mushtaq K – because young capable men (like Azeem / Asad Umar and many more) are in PTI while Gvt and Opposition are infested with sold out, corrupt, inept and directionless people who are busy in making money Recommend

  • ukmuslim

    thought provoking article…
    “Pakistan has been receiving energy aid from the US since the 1960′s; USAID funds built two huge hydroelectric projects”
    looks like for last few decades, USA was helping economically to build this nation

    Pakistan’s share of USAID is able to fund energy this year, however, is only $112 million– not enough to solve the problem and too little to earn Pakistan’s gratitude
    and still this thanksgiving ?

    i have strong feeling that, may be because of capital raising incapability (read mismanagement), pak did not construct dams, which they were suppose to build yesterday. now they are facing acute problem today.Recommend

  • Sheharyar

    Well done PTI for having champions like you!Recommend

  • G. Din

    “Pakistan’s share of USAID is …. not enough to solve the problem and too little to earn Pakistan’s gratitude.”
    There isn’t enough aid in the world that will earn Pakistan’s gratitude, simply because Pakistan is fundamentally an ungrateful nation.
    Author: No matter what the economics of various forms of energy generation may be, how can anyone expect any investment into that effort if even your government is defaulting on payment for energy used. No one expects the aam aadmi to pay his bills when his government cannot and when he can get it for free by stealing it straight off the distribution lines!
    Couple this with the fact that even your brotherly Muslim country, Turkey, has sued you in the International Court of Arbitration for breaking your contract with it on the orders of Supreme Court. You may not only have to pay what you owe them according to the contract you signed with them but also punitive damages. How do you expect that any other country will come forward to provide you succor?
    There are, however, some in India who have offered you 5000 MW of electricity (when India suffers from energy shortfall itself) if you can pay for about 50 mile length of transmission line. This too is iffy because some of your “alert and wise” guys have sued your government and asked the courts to stop it from proceeding with it.
    Now, what?Recommend

  • obaid

    So Pakistan’s energy generation is largely tied to the external funding (mainly US) which requires Pakistan’s cooperation with the west, however Pak’s cooperation may in turn exacerbate anti-US sentiments which puts the government in a tough spot. Recommend

  • Ebi

    Very well composed!! Recommend

  • http://www.facebook.com/britishmuslims Mohammed Abbasi

    That auntie made me comment… Now I will read the article!Recommend

  • http://www.facebook.com/britishmuslims Mohammed Abbasi

    Just finished reading this – one seriously good article, not surprised that he is part of PTI – if such people can get into Pakistans government then the nation must change for the betterRecommend

  • Parvez

    Excellent review. On a lighter note in todays daily paper Rehman Malik has offered his services to fix the problem. Now who says this government is not serious ?????Recommend

  • http://www.facebook.com/britishmuslims Mohammed Abbasi

    @Parvez: any chance you can tell rehman malik NOT to offer his services as we are getting on ok so far!Recommend

  • http://www.goldentopics.com Sardar Ajab

    Very informative article. Recommend

  • BRUISED INDIAN

    the aunty with bulb in mouth – DISTURBING!Recommend