Energy crisis and its solutions

By Ishfaq Ahmed Mughal

Pakistani masses are rightly to ask question themselves that what did our elected and non-elected rulers for us in 64 years of independent if even they have no basic facilities. Unluckily, we are among of those nations which are facing not only lot of infrastructural problems but have no capable and visionary leadership. Today, we plunged into serious energy crisis for last five and six years after enjoying surplus energy reserves due to incompetence, non-sincere and visionless political leadership.

The economy is loosing annually 2 to 3 percent of our total GDP which means we are loosing almost $4 billion annul due to energy shortage for last six years. Hundreds of thousands workers lost their jobs and the manufacturing productions fell and entered into negative zone.

The country’s power sector is facing vicious problems including bad governance, imbalanced energy mix, the circular debt and affordability issues. These challenges not only halt our GDP growth but it badly affecting to the common man.

In 2000, Pakistan was energy surplus country and it was in position to export power to neighbor countries like India. After 2001, when the GDP started grow with the ratio of 6 to 7 percent, than government had no plan to meet the country’s future energy requirements that’s why it did not manage to add additional power into the national grid. In 2006, the managers of the country had realized that they are going to power deficit. On the eve, they have been wasted lot of time and power requirements increasing with 10 percent annually. On the other hand, they have no solid plan to bridge the gap. Consequently, the country faced almost eight thousands megawatt shortage in peak season.

Incompetent government led by PPP, could not add significant power in the national system after four years regime. The country is facing daily average power outage 8 despite its demand is not more than 18 thousands megawatt in peak season while installed generation capacity is more than 21 thousands mega watt. It is because of some power plants which are not generating power with full capacity due to non-availability for fuel and but some are inefficient and outdated power plants belonging to public sector.

Due to bad governance of power distribution companies, line losses and recovery of payments by the consumers is not satisfactory level. Line loses of electricity are 12 percent to 37 percent of different distribution companies which should not be 10 percent technical line losses. Recovery payments ratio is up to 85 percent which should be improve. In terms of Rupee, the nation paying Rs 70 billion due to only power theft and kunda system. This is because of over billing, price hike of electricity and mal administration.

Inefficient and outdated power plants are also contributing for increasing the power production cost. Some outdated public power plants in the system producing electricity at the rate of almost Rs 34 per unite.

Imbalance energy mix is also another problem which is creating problems of affordability and circular debt. Currently, in Pakistan, 67 percent power generation from thermal out of which 40 percent from oil, 24 percent from gas and three percent from other sources while remaining 33 percent power generation from hydel sector. But global average of energy basket is 5.6 percent from oil, 21 percent from gas, 41 percent from coal, 14 percent from nuclear, 16 percent from hydro and 2.6 percent from 2.6. Thermal power is costly but coal, alternative, renewable and hydro power is cheaper.

It is amazing for all of us that the rest of the world is going to cheaper sources of power generation but we are going to costly sources of power generation despite having sufficient cheaper sources including hydro, wind, alternative and coal.

Depending on thermal power is core dilemma of the sector. It is not only ballooning up to the county’s oil import bill but it is price hiking and creating circular debt. How it is possible for Pakistan to pay subsidy daily almost Rs one billion to power sector for providing cheaper power to masses. But, the government took tough task and trying to pay untargeted subsidy without having fiscal resources. That’s why, it can not pay timely due amount of subsidy which creating circular debt in power sector which reached at the level of Rs 300 billion. Non-payment of subsidy and power theft, most of the power plants closed due to unavailability of fuel. Last week, the government had paid Rs 10 billion and power outage was eliminated at once. It means, problems is not production side but is related to mal-administration and fiscal mobilization.

The government did not give importance to the hydro sector which can produce power at average Rs 1.50 per unite and gave priority to costly source (thermal). In fact, we are paying huge price of this negligence in the shape of higher power tariffs and power shortage.

Lack of planning also can be seen in gas production side. The government could not manage investment for new exploration projects. Due to this, the country is facing gas shortage from last couple of years. Even, in summer season, gas requirements could not meet. The CNG stations facing three-day closure in a week while remaining sectors including power generation companies and industrial sectors are also facing gas shortage. Many industries have closed due to insufficient power supply.

To curtail the power crisis and its prices, the policy makers should take measures on different levels.

To make affordable power tariffs, the government should device a strategy to reverse from oil fuel to hydro, coal, gas and alternative for power generation. By this policy, the government will not only be able to get cheaper energy but it also to be able to reduce the import oil bill and get target of energy security.

To reduce power tariffs, first of all, the government should arrange to eliminate circular debt and reprioritize the mechanism of subsidy. Circular debt is not only halting the capacity of power generation but it also transmitting a negative signals to the existing and prospective investors that this sector is not suitable for investment while the sector is hunger for new investment. It should adopt a policy of target subsidy to only vulnerable segment of the society. Secondly, it should be managed to improve the capacity of power distribution companies so that they could be able to improve their efficiency by reducing power theft and improve bill recovery. It should devise the strategy for eliminating or upgrading the existing outdated power plants.

Currently, the government adopts uniform policy for load management and almost there is no discrimination on policy level. To encourage the trend of bill payments and reducing power theft, the government should more load-shading in the areas where collection is poor and the areas where losses and theft are lower should be sold more electricity.

To meet the demand of the gas, the government should initiate new exploration gas projects on war footings on medium and long term policy while reprioritize the existing gas distribution formula on short term policy. It should give priority for providing gas to the power generation plants and industrial sectors instead of domestic sector so that the wheel of the national economy could move towards. Although it is not easy task for any democratic government but it is dire need of the hours to save the economy.

The government can not alone control on the energy crisis and the nation should also join hands with the government’s efforts. Energy conservation policy can only be successful when every individual will contribute honestly and try to best for conservation. This tool will prove useful for curtailing the energy crisis on short term and long term.