Business Economics

Energy crisis in Pakistan

In times of such technological advancement, energy has become the only standing lifeline
for a nation to rely upon. Energy is deemed to be the right hand of any developing nation.
A country at the center stage of attention since the 9/11 attacks, Pakistan has had its share
of great demise with regards to solving their energy crisis, a crisis that was born and bred
soon after their partition from India in 1947.

For Pakistan and for any other nation, energy is the fuel that powers that imperative economic
engine. It is the only pushing force that allows the industrial and agricultural sector to move
forward or at the same time, equally backwards.

Pakistan's social sector has collapsed further and formed a crater deeper than ever only because
their energy consumption per capita has decreased to an all time low. Many governments have
come and gone by all promising to give the energy sector a new start, however to the unfortunate
fate of the citizens of Pakistan, a formidable sketch to diminish the menace of the energy crisis
has always been far away from reality.

Energy crisis has created a distortion in every field of life in Pakistan. Industries (Textile,
Automotive e.t.c) and other major projects are going to close. Unemployment has increased s it
never before. Inflation rate has reached to a maximum .These are the major factors in the
destabilization of the economy of Pakistan.

Pakistan's energy sector constitutes mainly of oil, natural gas and HNP power where the
contribution is listed as 43% usage of oil, 38% natural gas and 10% of HNP. The real shame that
grinds Pakistan is that although they have the fourth largest coal reserves in the world they are
still seen importing over 2.5 million tones on an annual basis.

Partly contributed by gas shortfalls, the power shortage is expected to be little over
5,250MW by 2010, he said, adding that the oil demand would also increase by over 23 per
cent to about 21 million tons in 2010 from the current demand of 16.8 million tons.

Currently, the government of Pakistan states optimistically that the energy crisis will end by the
year 2009, something the citizens of Pakistan openly laugh about. The current scenario of the
energy crisis in Pakistan faces about a shortfall of a whopping 3,500 MW. To make things
worse, the government of Pakistan's inability to deal with the energy crisis has forced many
industries all across Pakistan to shut their business down due to the unavailability of electricity.
This means that an additional 1500-2000 MW is to be added to the already 3,500 MW shortages
forcing the gap to further widen to a massive shortfall of 5000 MW.

One must ponder and wonder over how a country that has the 4th largest coal reserves in the
world has to face such devastating shortfalls of electricity. All around the world countries like
America, the global superpower avails over 50% of its electricity from coal, China focuses on
providing energy to its people by extracting over 75% of its energy from coal and even
Pakistan's nemesis for over 62 years, India uses coal to supply 57% of its energy. It is with great
shame and distraught that Pakistan doesn't use coal for even 5% for its energy purposes.

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The World Bank played facilitated diplomatic negotiations between India and Pakistan, backed
with technical expertise. The resulting agreement, known as the Indus Waters Treaty (IWT),
was signed in 1960. Under this treaty, Pakistan obtained exclusive rights to use 135 million
acres-feet (MAF) of water of the Indus, Jhelum and Chenab. India retained the rights to use 33
MAF of the three eastern rivers: Ravi, Beas and Sutlej. Under a comprehensive master plan for
the utilization of its allocated share of the water, India constructed link canals and dams having a
storage capacity of 17 MAF.

Pro Views on Energy Crisis:

Many governments have come and gone by all promising to give the energy sector a new start
but unfortunately due to democratic and political instability in Pakistan no one could change the
fate of the citizens of Pakistan. There are many hurdles for the Government in order to cope with
the energy crisis.

20th April, 2009 KARACHI - Prime Minister Yousuf Raza Gilani on Sunday formally
inaugurated Pakistan’s first wind power project at Jhampir in Thatta district, which will
have the generating capacity of 50 megawatt.

ISLAMABAD: Prime Minister Syed Yusuf Raza Gilani said on Friday that resolution of the
present energy crisis in the country is foremost priority of his government and urged the US and
international community to extend help to develop the power sector.

The problem doesn't end here for the Government, sadly it actually begins. The collapsing, if not
already collapsed energy sector of Pakistan has drowned in its own circular debt of over Rs. 300
billion. The fingers mostly point at the Karachi Electrical Supply Corporation (KESC) and
FATA who although have received subsidies by the government, have failed to pay what they
owe.

KALA BAGH Dam is a very important project which has been a victim of political and regional
pressures. Feudal lords still are not in the favour of this project. This government and previous
government have tried their level best to develop a consensus with these feudal lords on this
project but all are in vein.

Oil prices all over the world shoot up to an unbearable price and economic condition of Pakistan
is not

Poor Planning of last Government (Shaukat Aziz) in the distribution of electricity in the rural
areas without even single megawatt energy in the eight years tenure.
Population is another big factor in this crisis as electricity and petroleum products consumption
has increased 3 times than the consumption in the last decade.

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Contrary Views on Energy Crisis:

Wapda had conceived installing three hydel power projects, at Allai Khwar, Khan Khwar and
Duber Khwar in the NWFP, with a cumulative capacity of 323 MW, which were to be
operational by June 2006. Likewise, Gomal project of 130 MW and Raised Mangla project of
180 MW capacities were scheduled to go on stream by December 2006. All these projects,
currently under construction, have been delayed for completion by almost two years.
None of the projects however has achieved any physical progress so far, though the first two
projects were sanctioned under 1995 Hydro Policy. The case of New Bong Escape project is
cited here, for which the sponsors signed power purchase agreement with the government in
April 2004, but the project could not attain financial close as yet. Shockingly, even the project
consultants have not been appointed.

Government is now introducing Rental power plants to cope with the electricity crisis.
Electricity will be procured at an average of 17 cents /unit.
The cost of this project is about 02 Billion $. This giant cost will definitely affect the economy of
the country which is already in unstable state.
Government has declared 6% increase in electricity tariffs in October 09, another 6% in January
2010 and about 10 % in June 2010.

Maintenance of existing IPP’s (Independent Power Plants) which normally start on simple cycle
plants and then converted to combined cycle over a period of time has not been carried for a long
time. These plants can be made efficient by up gradation

Textile industry which was the best biggest export in the past is now facing a distortion.
Abysmal state of Industry, out of 546 Textile, 104 have been shut down. Other Manufacturer
group (Leather, carpets, sports good, footwear, surgical goods, cutlery, gems,
jewllery etc.) is also facing the menace. High cost of energy cost leads to higher product price,
making it less competent in the international market, instead of borrowing billions of money
(like Gerry Lugar Bill), getting access to international market will lead to more sustainable
growth.

Like Previous Government this government also has a mandate of not Building the dams.
Government has failed to deliver a master plan for building the new dams in country. Only
feasibility reports have been generated but there is no implementation occurred.Building of dams
will liberate Pakistan’s economy from oil dependency and our agricultural sector will grow by
leaps and bound.

Pakistan trade deficit has reached to 13.0% of GDP. In the fiscal year 2008, hitting double
digits for the first time since 1996.As per FBS, Pakistan import bill reached US $39.96 bn, while
export surged to US $19.22bn.

KESC circular debt has been on the rise and is reaching the utmost level of peek, a level
deemed to be dangerous. But government has not shown interest to resolve this root cause. With
the nationalization of KESC, the government can directly tackle the issues that have led to such a
shortfall of energy.

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Government needs to realize that by not acting on their large reserves of coal; they are not only
cutting their own legs but are faltering on a large basis. They need to form a proper strategy with
the help of an international consensus that can provide the correct technology and feasibility that
is needed to turn that coal into the much needed electricity.

A country like Pakistan who has many allies (China, Iran, and Saudia Arabia) in the region
needs to be friend and make important use of those very allies by inviting them to form a joint
solution on the electricity problem.

Conclusion and My Views:

 The time is indeed now and only now for the government to move ahead and focus on
such problems. A comprehensive and sustainable energy plan is what the government
needs and moreover they need the will to work so that the unattainable can be attainable
 ‘’Pakistan needs to avail electricity from a mixture of sources such as HEP, indigenous
gas, coal, wind, solar and nuclear energy whilst at the same time limit and minimize the
usage of oil as its number one source of electricity’’.

 In my perspective, any such policy should be made at the highest level and its
implementation should also begin there because charity starts at home. The common
man would only be convinced of the looming crisis when he sees the ruling elite practice
what it preaches.

 The current energy consumption trends in Pakistan are extremely inefficient, whether it be
in the domestic, industrial, trade or commercial sectors. With minimal effort, well over ten
per cent of national electricity can be saved by applying only the first level of energy
conservation that is a change in attitude. It is simple, instant and effective and all it
requires is a stop to using energy unnecessarily.

 A further economy of 10-15 per cent can be achieved by introducing the second level of
energy-conservation practices, especially in industry. Collectively, just through
conservation, more than half of the electricity deficit can be met. However to do that,
public education is essential. With the help of effective electronic and print media
campaigns the government can quickly educate the masses.

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