The case of increasing shortfall in the absence of an effective energy policy
The genie of load shedding is out of the bottle once again. As the government failed to devise and implement any sound policy to enhance the generation capacity, the energy crisis has grown out o control. Its claims of reducing load shedding during Ramazan, too, have turned out false. With the shortfall now touching 7,000MW, many rural areas and urban centres are witnessing intolerable lengths of power outages; up to sixteen hours per day in some areas. In the first significant wave of demonstrations this summer, people took to the roads protesting against load shedding last week. Violent protesters came out in major cities of Punjab, including Lahore, where enraged demonstrators attacked a LESCO office. For the government, this is not a good sign of things to come.
Pakistan’s energy crisis has now persisted for a long time. While new and effective plans are hardly devised, the existing projects are also plagued with conventional inefficiencies. Failure of successive governments to adequately address to this issue has now made it one of the most pressing concerns nationwide. Not only has the load shedding affected households, but prolonged power outages have also become a menace for the industrial sector, hampering the social and economic growth at large. To reach any reasonable estimates of how long we will have to face this problem, it is essential to look into its various facets and the progress, or the lack thereof, made towards solving it.
The dilemma of dams
Hydroelectricity is the second major source of power generation in Pakistan, contributing 34 per cent to the total production. In addition to being environmental friendly, hydroelectricity is also the cheapest source of energy. However, lack of planning and implementation in building new projects has decreased the share of hydroelectricity in the total generation mix over the years.
Once considered a potential game-changer in Pakistan’s power sector, Kala Bagh Dam has now become a political taboo. Severe opposition from some political circles of Sindh and Khyber Pakhtunkhwa has controversialised the issue. While many experts believe that building KB dam can result in many economic and social advantages, no national leader has dared to build consensus on it and the project now lies virtually dead.
Once considered a potential game-changer in Pakistan’s power sector, Kala Bagh Dam has now become a political taboo. Severe opposition from some political circles of Sindh and Khyber Pakhtunkhwa has controversialised the issue.
Presently, the major working hydropower projects are Ghazi-Brotha Power project, Tarbela and Mangla dam. However, the storage capacity of Tarbela and Mangla dam has reduced over the years due to siltation and their workable life, without any kind of renovation, cannot be estimated to be too long. Diamer-Bhasha dam is another project that has been in the pipeline for quite some time now, surrounded by its own share of maladies. The multi-billion dollar project is struggling to arrange finances for itself as the World Bank and Asian Development Bank are reluctant to fund it. It is now feared that Bhasha dam may not be a reality for another 17 years.
While the primary focus in solving energy crisis should remain on investing in hydroelectricity projects, many previous governments had other things on their priority list. Rather than undertaking projects with long-term benefits, a major chunk of taxpayers’ money was hastily spent on finding immediate solutions.
“Hydroelectricity projects take years to complete and start production; hence governments opt for easy ways out by investing on sources of thermal power”, said Dr Ahsan Rana, a development professional and a professor at LUMS.
“Power generation through thermal means immensely increases the cost of production”. This also explains the exponential increase in the electricity tariffs in recent years.
Thermal sector is now responsible for contributing about 65 per cent of total energy production in Pakistan. The increased reliance on thermal power plants has meant an introduction of a cumbersome demand and supply chain in the system consisting of Independent Power Producers (IPPs), Central Power Purchasing Agency (CPPA), distribution companies and public/private customers. Circular debt is created when any one of these stakeholders in the chain defaults on its payment and thus disrupts the whole chain. Usually, circular debt results when the customers do not fully pay their electricity bills to distribution companies, which then fail to make payments to CPPA. CPPA in turn fails to pay power producers (mainly IPPs). When IPPs default on their payments to the oil companies; the circular debt translates into a reduction in electricity generation.
Soon after coming to power, the PML-N government made a payment of Rs480 billion to curb the circular debt, without undertaking any kind of energy audit of the power producing companies. However, since no viable policy was framed to ensure any long-term solution, the circular debt has now soared to over Rs350 billion again, resulting in the current wave of load shedding. The government, this time however, has decided not to make any payments to tackle the circular debt and if all remains the same, the power shortfall is only likely to rise.
Hafeez Pasha, former federal minister and renowned economist, believes government has no option but to bail out power producing companies once again. “Rs350 billion should be paid to IPPs immediately if this crisis is to be solved”, he said.
Soon after coming to power, the PML-N government made a payment of Rs480 billion to curb the circular debt, without undertaking any kind of energy audit of the power producing companies.
He added that the government was shying away from paying the amount to prevent the budget deficit from increasing. Pasha also said that the government did not take any considerable action in one year towards solving the issue and is now making lame excuses about it. “It is surprising that it took the government one year to learn about transmission losses”.
While government’s bailout packages can temporarily resolve the prevailing crisis to a considerable extent, it cannot be considered a long-term remedy. According to Dr Ahsan Rana, two of the main reasons that allow the circular debt to occur are the transmission losses and electricity theft. Estimates suggest that around 12 per cent of the power is lost due to poor transmission infrastructure. Similarly, with billions of rupees of outstanding dues, non-recovery of electricity bills is also a major issue. To ensure any form of permanent solution, the government will have to completely revamp the transmission and recovery mechanism.
‘Pray for rain’
That is what the Federal Minister of Water and Power Khawaja Asif asked the people to do recently in a press conference. He hoped that the power shortage would decrease in a few days “with the help of God”.
Khawaja Asif’s remarks symbolise government’s complacence and negligence in effectively tackling the power crisis so far. In an election rally last year Shahbaz Sharif had famously promised to end load shedding in six months. However it was only after it assumed the government that PML-N realised that it did not possess the magic wand it had led the voters to believe it did.
According to PEPCO’s data, there has been no increase in the power generation over past one year while an increase in demand has further worsened the situation. The government had earlier promised to significantly reduce load shedding in the month of Ramazan — a promise it miserably failed to fulfil.
A senior officer at ministry of water and power, wanting not to be named, told Pakistan Today that “We believed we would be able increase 1500MW of generation through IPPs for Ramazan, however we faced some serious infrastructural constraints”. He also added that “up gradation of the transmission system is being currently planned”.
While the electricity tariff has significantly increased over the past year, the power sector has shown no signs of improvement. The government now needs to act beyond gimmicks to immediately take effective measures towards increasing power generation.
With Tehreek-e-Insaaf’s long march around the corner, the government can least afford public protests fired up by hours of load shedding. While power shortage has become an endemic undermining the socio-economic growth of the country, it can also become a major political drawback for PML-N. How successfully will the government be able to solve the crisis is a question only time will answer.