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Pakistan's energy policy going nowhere
Publication Date : 20-01-2014
“My government is devoting its time and resources to tackling the energy problem,” Prime Minister Nawaz Sharif said in his first address to the nation of Pakistan in August last year.
By the time he said this, his government had cleared unpaid bills of 480 bilion rupees (US$4.5 billion) of all public and private power producers and their fuel suppliers, which, he said, had secured 1,700MW of electricity for the national grid. The National Energy Policy (NEP) was also ready by end-July 2013.
Almost six months down the road, his government is finding it tough to meet even the reduced power demand for winter, while gas shortages have left people unable to cook foor and boil water. At the same time, private power companies are raising concerns over more unpaid bills.
The ambitious New Economic Policy (NEP) seems to be going nowhere. Fatigue and desperation are slowly overtaking ministers and Punjab Chief Minister Shahbaz Sharif, who were tasked to reform the collapsing power sector and woo private investors.
Potential investors, on the other hand, are waiting for the government to first implement the promised power sector reforms before they invest in new generation projects.
The Memorandums of Understanding (MoU) signed by the Punjab and federal governments with Chinese companies who had shown interest in investing in power generation have proven to be nothing more than worthless pieces of paper.
"This so-called energy policy is no more than a concept on paper, and to think that its targets can be achieved in five years is being unrealistic," said a former Pakistan Electric Power Company (Pepco) boss.
“It is a flawed document authored by those with no experience or stake in the power sector. No milestones have been set and no execution strategy formulated,” he argued.
His comment isn’t off the mark. Apart from having substantially raised the electricity prices for all consumers to reduce power subsidies from 1.8 per cent to 0.3-0.4 per cent of GDP, the government has yet to execute other aspects of the ambitious policy that promises an investment of over $25 billion in the power sector to end blackouts by 2017 and produce surplus electricity by 2018.
The delay in reforms has increased transmission and distribution losses from 28 per cent to 29-30 per cent, and added another 89 billion rupees to the unpaid bills from July to November 2013.
The campaign against gas and power thieves has fizzled out. The planned import of electricity from Central Asia, Iran and India has been put on the back burner and the energy conservation strategy postponed til summer.
The planned import of Liquified Natural Gas from Qatar, and gas pipelines from Iran and Turkmenistan remains uncertain. The land space for the Gadani Power Park, which is to produce 6,600 megawatts of coal-based electricity and bring down the price to $0.10 a unit by 2018, is yet to be acquired.
The government claims it intends to use its own funds to construct the Diamer-Bhasha dam, and the Dasu dam with multilateral assistance. But judging from its progress, it looks like the work is unlikely to start soon.
The proposed conversion of four oil-based private power plants is now considered unfeasible, not least because of logistical problems in transporting imported coal from the port. Besides, a new tariff is yet to be announced for them.
Restructuring and reform of public power generation and distribution companies, to prepare them for privatisation is not going anywhere because boards have not been reconstituted; chief executives haven’t been appointed; and decision-making powers have not been appointed. The overhaul of the power sector regulator is also yet to take place.
However, credit must be given to the government where it is due. A couple of thousands of megawatts are expected to be added to the national grid once the Neelum-Jhelum, Nandipur and other small thermal and hydropower projects are completed.
A former Hub Power Company Limited (Hubco) boss said that the government is pushing for the completion of these projects, while another industry player said that the growing energy crunch, which saw up to 18 hours of blackouts in urban and rural areas nationwide last year, is the country's biggest security and economic threat - bigger than terrorism.
Pakistan is estimated to have lost 10 per cent of its GDP in the last five years due to power shortages, leading to declining private investment and a growth rate well below South Asia’s average.
Chances are the consumers will suffer long power cuts and higher electricity prices during the next summer. If that happens, street protests and riots are likely events.
Taking a cue from how the ruling Pakistan Muslim League-Nawaz (PML-N) leadership used protests to rally the public against its predecessor, the opposition, particularly Imran Khan’s Pakistan Tehreek-e-Insaf (PTI), will not shy away from them either to discredit the government.