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Mr. Prime Minister! This is why Public suffer from Electricity Loadshedding

Prime Minister of Pakistan seems very worried about the electricity shortfall in the country. He has already chaired few meetings to demonstrate his Government’s commitment to resolve the electricity shortage crises in Pakistan. Although Ministry of Power is sounding very confident about keeping electricity shortfall to 3,000MW during summer2014. But it clearly means cuts of up to 8 hours per day which will definitely lead to street protests.

It is without exaggeration and beyond the doubt that electricity shortfall has become one of the most significant issue for the recent Governments in Pakistan. Although various high level committees over the years have astutely identified the problems and solutions, but there is a repeat failure to translate this into policy action. It is unbelievable that Pakistan generated surplus electricity from the late 1990s to 2004-05. But since then, the country has been facing an acute shortage of electricity. The present crisis started in 2006-07 with a gradual widening in the demand and supply gap of electricity. Since then this gap has grown and has assumed proportions which are considered to be the worst of all such power crises that Pakistan has faced since its inception. The electric power deficit had crossed the level of 5000 MW during the last few years.

The persistent shortage of electricity in the country has adversely affected the national economy. Industrial production has been severely hit; and also triggered social unrest which sometimes turns violent thus, creating law and order problems in many urban centres in the country. According to one estimate power shortages have resulted in an annual loss of about 2 percent of GDP. One of the recent studies suggests total industrial output loss in the range of 12 percent to 37 percent due to power outages.

The energy crisis is a complex, long-running, and multifaceted problem. For the economist, it is primarily a circular debt issue. For the political watcher, it is an issue of absent political will. For the aid organization specialist, it is a governance problem. For the engineer, it is a matter of resolving technical problems, improving energy conservation, and addressing issues like theft and non-payment of electricity bills. Let’s analyse the factors which have fed into the crises of electricity shortage.

Circular debt is regarded as one of Pakistan’s major problem. The electricity sector has been seriously affected by the inter-corporate debt. Besides creating budgetary problems, this has badly affected the power sector. Such debt is created when the power generation companies under PEPCO and KESC fail to clear their dues to fuel supplier. The problem began when the government pledged to compensate energy companies with subsidies in the face of higher costs rather than allow them to increase prices, but subsidies then went unpaid. As a result, energy companies have borrowed to make their payments, with many now reach­ing a point where they cannot afford to borrow further. As a result, with energy companies unable to pay fuel suppliers, fuel supplies have been curtailed, or worse still, halted, which in turn means that power companies have insufficient supplies to run their plants, reducing generating capacity. The government so far has not worked out a mechanism to curtail the accumulation of debt permanently; nor has it been strict with the defaulters. Instead, the injecting of money demands from the government to borrow billions of rupees from commercial banks through various instruments to make partial payments of the debt to reduce it to a manageable limit. Generally the default amount is more than the government’s capacity to pay at a given time with the result that the circular debt is building up.

The sector suffers from years of underfunding.  As a result, no power project could be set up in the last ten years or so. In other words, this reflects a weak governance structures at the decision-making level or it may be, an excellent example of rent-seeking behaviour, as it has beenhighlighted by the World Bank that the investment related policies are an alluring target for rent seeking by firms, officials, and other interest groups.

Attempts to attract private sector in­volvement (particularly through privatisation) have met with little success in recent years, a situation that current financing constraints (resulting from the fragility of the global economy and domestic fiscal problems) only exacerbate. As a result of underfunding, existing infra­structure is in need of repair and refurbishment, while plans for new plants and equipment are either put on hold or delayed. Much effort needs to be focused on upgrading and replac­ing aging equipment. Transmission and distribution losses are high, and the average thermal efficiency of power plants needs to be increased.Pakistan finds itself in the odd position of having low energy prices, and high levels of non­-payment. Power theft is rampant, and unpaid bill losses are huge.

Pakistan has a national energy policy, but it is unresponsive, only partially implemented and implementable, and at the mercy of competing bureaucratic interests. Overall, the sector is poorly managed, exhibiting considerable institutional overlap and poor capacity, a situation that has become more evident as the energy situation has deteriorated. Six ministries and forty-two agencies are involved in Pakistan’s energy policymaking and provision. Successive ad­ministrations have added task forces, created special adviser posts, and one-off commissions.Earlier reform measures, particularly from the 1990s, were only partially implemented. Reforms, such as privatisation, need to be reconsidered, and a more enabling environment for reform created through areas like regulatory improvement and enhanced security for investors, their personnel, and assets.

The federal and provincial governments need to work together on the energy issue given their overlapping remit, but there are numerous instances of tensions and deliberate impediments to policy progress from one side or another. A longer-running and serious issue is provincial opposition to federal plans in areas of hydroelectricity development. This routinely sees Sindh and KPK in particular oppose large hydroelectric schemes on the basis of their negative effects, including displacement and drop-off or silting up of local water resources.Most of the hydro projects are planned on the Indus River. The implementation on these projects requires political will otherwise they will keep on delaying. Sharing of water resources has been a major source of dispute among the provinces in Pakistan. It has affected the construction of hydro power projects in both the public and private sector. Past assurances of compensation for losses connected to displacement have not been fully actualised, aggravating the sense of mistrust and injustice. The dynamic has been on display for some time in Balochistan where federal-provincial tensions over energy resource distribution are most acute.

It is generally believed that the present crisis is a self-imposed problem ensuing from years of bad management, lack of proper vision for future, and poor policies. Unfortunately, the scale of the problem has now grown beyond any immediate solution. In the last ten years there is no substantial increase in the generation capacity in comparison to a steep rise in electricity demand. To a great extent, failure on the part of previous government to timely react to the situation lead the country into a severe electricity crisis.

Present Prime Minister after assuming his office, recognised the magnitude of the crisis and its effect on the people and the economy. He is trying to undertake significant reforms but unfortunately,  the situation instead of improving is becoming worse day by day. 

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